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UK FCA finalises rebate rules

The UK Financial Conduct Authority (FCA) – the new, allegedly improved successor to the FSA – has published the long-awaited “platform paper” setting out new rules on rebates of fund charges from fund managers to investment platforms.

This follows the Retail Distribution Review rules that came into effect at the beginning of the year, which banned financial advisers from receiving ongoing payments made by fund managers (a practice known as trail commission). The FCA will now bring in something similar for investment platforms, which are the intermediaries where the investor or adviser can access funds from many different fund firms in a single place.

These rules will radically alter the way that UK platforms and fund supermarkets charge for their services, since most currently rely on these rebates as some or all of their charges. In future, they will need to charge investors directly for their services.

For more background on how rebates and charges currently work, see this earlier article on RDR and unbundled pricing. Below is a quick summary of the FCA’s new rules and what they may mean for investors.