OK, no funny stuff this time, straight to it.

PS13/1 is the logical extension of the RDR, and the paper which, in the main, kills off the model that built something like 60-70% of the assets under administration in the UK platform market and nearly all the D2C market. All that bundled supermarket business is caught.

The war was fought. The wraps won. Game over.

As ever, you can get a summary of the basic stuff from pretty much anywhere, so I won’t spend much time on it here, but I will look at a couple of the more tucked-away bits that will also have an impact. Can I urge everyone please to read the paper itself – it’s not too bad – and particularly the Made Rules appendix which is the stuff you’ll actually be measured against. Don’t just read the summaries (including this one); don’t just read the nice language at the front. Go to the source text, there’s a lot to digest in there.

I’ll do 3 sections in this blog, it’ll be a long one. Basics first, then more hidden bits, then some thoughts on further implications.


  • Cash rebates die, unless they’re under £1. This remains stupid, but given HMRC’s intention to tax them into submission anyway, it doesn’t matter all that much.
  • Unit rebates survive, but no-one cares.
  • Deals which subsidise the platform charge if you invest in certain funds (hello Architas/Elevate, hello AAP/7IM) are strengstens verboten. Expect a fire sale.
  • Bundled business dies from 2016 (we’ll come back to that)
  • Transitional arrangements from 2014-16 come into play – basically if you sneeze you’re caught and have to move to explicit / platform / adviser charging.
  • D2C comes into scope (hurray), big changes for HL, Bestinvest etc.
  • ‘White label’ deals also in scope
  • FCA warns that the move to clean share classes shouldn’t increase overall costs to customers
  • There may be read-across to DFMs, SIPPs and insured business (double hurray)
  • Some payments to platforms from fund providers are still OK – corporate actions, screw-ups and advertising. We’ll come back to that too.
  • Advisers have new responsibilities to satisfy themselves that platforms are following the rules. We’ll definitely come back to that.


There are quite a few hidden little gems in the paper, mainly in the Made Rules section (that’s where the changes to COBS are and where the paragraph refs are from). Here are some of the ones that caught my eye:

  • The door has been left open for platforms to receive payments from advisers. Why would advisers pay a platform? Well, I think this is the door being left open for ‘adviser pays’ shapes. Really interesting stuff. Check 6.1E.6.
  • Some payments to platforms are OK, and we see this in 6.1E.7. Advertising in particular is still allowed, but with some checks and balances. These will be impossible to police and is a flashing red light to me. Crazy stuff.
  • If you’ve sold out a fund and a rebate comes in after the sale, it can be passed on in cash. That’s pragmatic.
  • IFAs should read 6.1E.9 VERY carefully – “A firm must not use a platform service as part of a personal recommendation to a retail client in relation to a retail investment product unless it has satisfied itself that the platform service provider, and its associates, only receive remuneration for business carried on in the UK which is permitted by the rules in this section.” Got that? It’s your responsibility to check. More below.
  • And while you’re at it, get in about 6.1F.1 – “A firm which:
    (1) arranges for retail clients to buy retail investment products or makes personal recommendations to retail clients in relation to retail investment products;
    (2) uses a platform service for that purpose;
    must take reasonable steps to ensure that it uses a platform service which
    presents its retail investment products without bias.” Again, it’s on your shoulders if you’re an adviser.

Obviously there are other interesting things in there about potential further action and read-across, but for this blog I’m interested in the here and now. Let’s have a think about…


Generally, what’s in here was well leaked and there are few surprises; the surprises there are are in the detail. I think there are 4 main impacts:

  1. Commercial implications for platforms – let’s not forget that the biggest platforms are all bundled and survive on retained rebates on the pre-RDR book. As with many industries, there is a cross-subsidy from the more profitable old book to the less profitable transparent new book. That cross-subsidy is a cash cow, which is now – very slowly – being led up the ramp to the abattoir. It’s a 2-year journey but it is going to happen. I estimate – based on the difference between explicit book charges (ie no clever deals) and rebate terms we’ve seen that this could cut revenue by up to 1/3rd in some cases, and 1/5th routinely. My business would hurt badly if you took 1/3rd of our revenue away, and so would yours. So will theirs. This is a big deal. The platforms involved will pivot to the operational impact in their messaging and sweep the commercial stuff away, which is what I’d do too, but the real story is the revenue drop for platforms which are already only marginally profitable.
  2. Costs to clients – FCA has been interesting in saying that where better terms than a standard ‘clean’ rate have existed, they expect terms to stay broadly the same – this is the fundamental basis of SUPERCLEAN. Nothing in there about unique availability though! I heard recently that certain large fund managers had seen an increase in revenue of 12bps post-RDR as a result of the move to clean. That means clients are paying more, and it needs addressed. Forget all the crap about market forces and economics, the lower priced classes need to happen and fund managers need to accept that they’ll be forced to offer those to anyone who’s ever gone to a negotiating class. 75bps was always a dream; time to wake up.
  3. Disturbance – there is some helpful text about what constitutes disturbance. This now includes re-reg, which is a change, but probably right. Cofunds are probably saying ‘told you!’ about now. So switching, rebalancing, topping up a DD or really doing anything except acting on automated instructions from pre 6/4/2014 will switch off trail and move the client to an explicit platform charge. Be ready.
  4. New IFA responsibilities – this is huge, sorry to bury it down here. Advisers reading this – you now have to satisfy yourself that the platform(s) you use is/are following the rules and presenting funds without bias. You have to do it. You can’t rely on the platform saying ‘yeah, we’re totally all about the rules, have you tried our diversified growth fund, would you like an umbrella?’. Platforms will have to step up and demonstrate how they are following the rules, and you as advisers (or the people who help you select your platform, or your compliance provider, or your network) will have to trust no-one and make them prove it. We probably all need to work together to make this happen. Please be careful if you’re using platforms who take advertising / marketing packages – you’ll need to pay extra attention here.

So that’s my canter through PS13/1. It’s game over for the old model. No credits remaining. There are chinks in the armour which I think the FCA will come to regret, but they’re relatively minor. We’ve argued, fought, and waited for this day for as long as I’ve been in the platforms sector, and now it’s here.

It’s a bad day for anyone whose bottom line depends on rebate revenue. It’s a pretty mixed day for IFAs who have a trail book, and also have new responsibilities for due diligence. It’s a fantastically good day for unbundled, transparent wrap providers who limit their revenue streams to a clear, open charge to the client. You won, chaps. Try not to gloat.

And with that, I’m off on holiday. See you soon, be good.