Treasury has decided not to issue a blanket ban on volume rebates, but instead only ban rebates that have the ability to distort the delivery of advice, according to Tria Partners.
The second tranche of the Future of Financial Advice (FOFA) reforms flagged volume rebates paid from platform operators to licensees will be banned, but the ban will not be extended to volume discounts offered to fund managers, where such discounts or rebates represent 'reasonable value for scale'.
"Our reading is that discounts and volume rebates between fund managers and platforms remain intact, where they represent pricing power that comes with the scale purchasing that platforms can achieve," Tria Partners managing partner Andrew Baker said in an email to clients.
"Moreover, there is no requirement to pass through discounts or rebates to the end investor; it can be retained as margin," he said.
Currently, some platforms pass through scale benefits to the end investor, while others retain it as an integral part of their revenue model.
"A blanket ban, or even just a requirement to pass through rebates to end investors, would have had a big impact on some platform business models," Baker said.
"So this is clearly at the milder end of the possible policy spectrum," he said.
Baker argues that despite the more lenient approach, the proposals will turn the screws somewhat on platform providers.
"In the near term, platforms need to revisit their revenue model, their policy regarding product discounts and rebates, and any existing programs of the types clearly being targeted," he said.
"There may have to be more transparency, particularly in respect of the reasonable efficiencies test," he said.
