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Categories:Other,Regulation

MM Leader: FSA faces clarity challenge over restricted advice charges

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For the RDR reforms to have a hope of being a success, the regulator must ensure its new charging rules are implemented effectively for independent and restricted advice.

The FSA has been clear that, for both independent and restricted advice, no payments can be made from provider to adviser relating to product distribution. The only payment an adviser can receive will come from a client-agreed charge.

The regulator has acknowledged the difficulties of ensuring its rules are followed by vertically integrated firms and the Treasury select committee has urged the regulator to conduct regular reviews to ensure the RDR is not circumvented.

But the FSA must also keep a close eye on ensuring that tied arrangements between big distributors and providers comply with its new adviser-charging rules.

In this issue, we report on a deal between Aegon and recently launched distributor Caerus Capital Group. Aegon is paying a considerable sum of money to Caerus attributed to “sale and marketing activity” to support their partnership which includes a five-year single-tie pension arrangement. Aegon and Caerus both suggest that such deals are common in the industry.

Elsewhere, Sesame Bankhall Group is inviting providers tendering for its restricted advice proposition to detail any “sales and marketing support (over and above normal activity)” on offer.

The FSA must give clarity and reassurance about what will and will not be acceptable after the RDR to ensure its reforms are not undermined. It would also be good to hear the regulator’s views on a potential rush to sign long-term distribution deals in the run-up to 2013.

Unless the regulator employs a tough and coherent stance on restricted advice arrangements, it will not just be European directives which threaten to derail its RDR reforms.

Where’s the dividend?


Last week’s restructure of regulatory fees saw the FSA pass up the opportunity to introduce a more progressive risk-based approach.

There are merits in moving away from the headcount system but the new income-based tariff does nothing to reward low-risk firms which take up little of the regulator’s time and resources. Talk of regulatory dividends has fallen off the FSA’s agenda when it should be central to its vision for the future.

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