Guidance on replacement business and CIPs, along with payments to platforms, may be underestimated

The Retail Conduct Risk Outlook 2012, like that of the previous year, highlighted platforms and centralised investment propositions (CIPs) as emerging risks. And now the FSA has published a new consultation paper (12/12) on ‘Payments to Platform Service Providers and Cash Rebates from Providers to Consumers’. Together with the guidance contained in its consultation on replacement business and CIPs, it is clear that most firms need to review their business models thoroughly to ensure that they embrace best market and regulatory practice. These papers should serve as a red alert for all advisory firms, say Jayne Adair and Roisin Hynes, who illustrate that some have underestimated their impact.

Jayne Adair (jadair@broadgatemainland.com) and Roisin Hynes (rhynes@broadgatemainland.com) are with The Consulting Consortium, which offers a comprehensive range of compliance services, products and analysis. Areas of specialism include compliance reviews and audit, past business reviews, s 166 and/or s 168, complaint handling and redress, interim CF10, FSA authorisation and retained on-going compliance support.

Centralised investment propositions cover portfolio advice services, discretionary portfolio management and distributor influenced funds. These services are often accessed through platforms. All too often, the introduction of Centralised Investment Propositions (CIPs) seems to have been driven by commercial objectives rather than the financial planning needs of clients. Many other firms have simply developed a CIP proposition to facilitate adviser charging and therefore perceived compliance with RDR. What is clear from all the recent consultation papers and policy the FSA has released is the intensified focus of the regulator on ensuring advisors recommend products and services based upon the needs and wants of their clients and operate in the best interest of the consumer.