Thought Leadership

Home Insights Thought Leadership What to ask wraps over unit rebates
Share on:

What to ask wraps over unit rebates

Article

Most retail distribution review (RDR) controversy has come and gone, but there is one topic guaranteed to still inflame emotion. Mention the ban of cash rebates among the platform provider community and you’re likely to be stuck for a good 20 minutes while spleens are vented.

Posted In: Wealth Management Administration
Published: 26/09/2012

Most retail distribution review (RDR) controversy has come and gone, but there is one topic guaranteed to still inflame emotion. Mention the ban of cash rebates among the platform provider community and you’re likely to be stuck for a good 20 minutes while spleens are vented.

What’s changing

First, for the uninitiated, from 31 December 2013 the Financial Services Authority will ban fund managers from refunding some of their charges in cash to platforms that, post-RDR, will pass rebates to end investors. The refund has to come in additional shares or units in the fund.

There are lots of claims and counterclaims made about what is involved in building the capability to deal with unit rebates, so let us try to shine some light on what this means in practice.

The key challenge for developers and, by extension, platforms and advisers is the redevelopment to deal with this conceptually simple change, which touches almost every part of the system.

No adviser has to be a platform software developer. So why should you care?

If your platform does not have this process already built, the effort to construct it from scratch is significant.

Questions to ask

Advisers should be ready to ask probing questions about readiness and development plans. They should demand coherent and realistic answers. Here are some questions we would suggest:

  • Do you plan to accept unit rebates?
  • If not, how will you facilitate the movement to clean share classes for all investors?
  • If so, do you have the facility in place?
  • If you do, can you demonstrate it to us?
  • What testing and checking have you done to ensure its integrity?
  • If not, when is your planned delivery?
  • What is your level of confidence in that delivery?
  • What contingency do you have in place for if timelines slip
  • What arrangements do you have in place for if timelines slip profoundly beyond year end?

This is one of those times where real open and honest partnerships will help relationships through what are likely to be challenging months.

By Robert De Dominicis

AU Privacy Policy   |   UK Privacy Policy   |   Legal   |   Site Map   © GBST 2018. All rights reserved.