For UK platforms, the end of 2010 brought to a close what felt like part one of a two-part movie feature.

The Financial Services Authority (FSA), in a leading role and in true Hollywood blockbuster fashion, kept the industry on the edge of its seat until the final act by saving its key platform announcements until the end of the year.

Despite this, a sequel in 2011 is inevitable as the announcements were merely the publishing of the FSA’s consultation paper on platforms, following on from the release of a discussion paper on the matter in March 2010.

At this stage nothing is final and advisers will have to wait until the sequel runs its course later this year before having full certainty.

The story so far is that the FSA is pushing for more transparency and at first glance, two of its biggest announcements in December appear to favour the industry’s big boys.

This came first in the shape of a watering down of the FSA’s initial stance on unbundling (some may say a u-turn), and secondly with the proposed ruling to ban cash rebates to clients.

But more on the issue of rebates in a moment; first let’s look a little closer at the implications of the FSA’s position on unbundling.

The FSA’s subsequent proposal on the matter; i.e. unbundling can continue in sorts, is on the provision details of any payments by manufacturers to platforms (for administration) are better disclosed to consumers, and that any such payments are not structured in a way which may introduce bias into product choice.

This is going to be difficult – for the fund managers at least, as not all funds are created equal.

In other markets, some funds hold such sway with intermediaries that it’s in a platform’s interest to have these funds on its product menu. In this instance, these funds invariably pay less (admin charges) to be on a platform than other funds.

Under the FSA’s proposal, this would not be possible – unless the smart cats working in the platform groups devise tiered administration pricing models for fund managers based on a broad spectrum of ‘services’ on offer.

Only then could we see differentiated administration payments made by funds management companies to platforms post-RDR.

The FSA’s position suggests one price should fit all – this is unfair for funds that hold significant demand sway among advisers.

The other extreme is what happened in Australia, for example, where a situation was allowed to develop whereby platforms began charging shelf space fees, which allowed some element of influence to be wielded over market forces.

This meant in some instances; less popular, more expensive, and sometimes lower performing funds were able to pay a premium in order to receive a preferential promotion from a given platform.

This was wrong, and the Australian regulator, the Australian Securities and Investments Commission (ASIC), eventually passed a ruling to outlaw this.

The practice didn’t stop there, though.

The smart marketers within some of the major platforms found a way around the legislation, by introducing what were commonly labelled preferred partner programmes.

These arrangements were a watered down version of funds paying for shelf space with signatories to these schemes promoted in a preferential way by platforms, through events such as adviser road shows and distribution of marketing and communication materials.

So what does the road ahead look like for UK platforms? One foresees the latter will be the way forward, but perhaps to a lesser extent than in Australia.

With increased disclosure requirements (even in a bundled environment) fund managers will have to balance the amount of promotional activities they do with platforms against how much they will have to pay the platforms for the privilege.

Too much and it will be interpreted as pay to play behaviour. What therefore might eventuate is an increased role for third party events (conferences, media, advertising etc.) whereby fund managers promote themselves alongside platforms rather than directly through them.

In general, the UK advice market is a little too fragmented for advisers to reap any major benefits from the proposed changes.

In some other countries, again using Australia as an example, the advisory networks are much more influential than the typically looser structured UK groups.

In Australia, the networks have tended to receive bulk rebate payments that platforms pass on from fund managers with the networks themselves keeping a slice and then distributing the remaining money accordingly based on an individual IFA or firm’s activity, fund flows etc.

It’s then up the adviser how much of this is returned to the client, depending on how the advice was paid for.

So where do the FSA’s impending changes leave UK advisers? Will the changes empower advisers to directly influence and negotiate on pricing? Unlikely.

The changes are all aimed at shifting the power towards the client. It may empower advisers to negotiate on behalf of their collective clients but any monetary benefit will have to be sanctioned by the client (in theory at least).

With the banning of cash rebates back to clients, much to the ire of the wrap providers, it’s looking more likely that a cash account or quasi-cash account (unitised structures) inside a platform will be the preferred mechanism for how clients pay for advice and advisers receive their fee.

These accounts may be fed by rebates from product manufacturers along with funds from the client with the key issue being disclosure.

For many the transition away from product manufacturer-subsidised advice to one in which clients shoulder more responsibility for advice costs is a death knell, on the basis significant proportions of the UK population are unwilling to pay directly for advice.

Consumer reluctance and apathy may be an issue on one side of the fence but on the other side, the direct market is also facing challenges of its own.

Interestingly while RDR is reshaping the advisory market, the European Union (EU), which to all intents and purposes trumps UK level legislation, is looking to ban certain transaction-only activities.

A plan by Brussels to overhaul its Markets in Financial Instruments Directive (Mifid) with the launch of Mifid II has wide-ranging implications for the industry.

The proposals could mean consumers would have to seek advice for certain transaction activities even if they prefer not to while undermining the RDR by allowing tied agents to receive commission payments for these transactions.

It’s a complex situation as Mifid could also push people into the IFA advice arena with basic transaction-advice opportunities potentially acting as a spring board for deeper client relationships.

*This article will appear in FT Adviser in February 2011.