Press Release

IMA SAYS TRANSPARENCY SHOULD UNDERPIN PLATFORM REGULATION

Tuesday 30 October 2007

The Investment Management Association (IMA) has called upon the Financial Services Authority (FSA) to focus the regulation of platforms on the transparency of the platform arrangements, so that investors and their advisers can make well-informed decisions in terms of the services to be provided and what will be charged for those services. IMA also believes that the type of service provided by the platform should determine the level of regulation required.  The key issues to determine what level of service is being provided are:

Whether the platform is purely administrative or offers services beyond administration; and
How charges are taken by the platform.
A purely administrative platform will act as an agent with open architecture and transparent charges.  Other types of platforms or "wrap" account services will have different features, such as a limited fund choice or wrappers which carry costs.  These features may lead to more opaque charging structures or decisions which are not in the best interests of the investor.

Julie Patterson, Director of Authorised Funds and Taxation, said:

"IMA supports a principles-based approach to the regulation of platforms according to the type of service provided by the platform.  A principles-based approach can easily adapt to market developments without the need for frequent consultation and detailed rule changes.

Fundamentally, consumers must be clear about how much they are paying and what they are paying for.  IMA believes that disclosure of the total expense ratio (TER), any initial charges and the fund's performance is the best method of allowing investors and advisers to compare investment funds with other types of investment.  This would also allow comparison to be made of the cost of buying funds direct with buying them through a platform or embedded in another product."