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Advisers say RDR charging rules lack clarity

Advisers do not believe the FSA has done enough to clarify its RDR rules around adviser and consultancy charging, according to research from Avelo.

The financial services technology firm polled 146 advisers in response to the FSA’s consultation paper on RDR adviser charging published in November, which was followed by a policy statement issued in March.

The rules state that where adviser charging is being taken from the product, providers can deduct adviser charges before or after the client’s money is invested.

Out of the advisers polled by Avelo, 69 per cent believed not enough had been done to clarify adviser and consultancy charging. Just 4 per cent felt the rules were now clear.

A further 74 per cent said industry feedback had not been taken into account as part of the consultation process. 21 per cent of respondents said the FSA had listened to feedback, but missed out certain key elements.

Avelo strategy and product development director Paul Yates says: “More has to be done to ensure policies are transparent and easily understood by the industry as a whole and not just its architects. If advisers are not clear, what hope do consumers have of understanding the proposals?”

Writing for Money Marketing, Syndaxi Chartered Financial Planners managing director Robert Reid highlighted some of the problems with the current adviser charging and consulting rules.

In particular, Reid raises the issue of charging for advice as part of pension recommendations and  triggering unauthorised withdrawals as a result.

Money Marketing revealed earlier this month that HM Revenue & Customs is preparing to rewrite its consultancy charging guidelines after concerns were raised about members potentially being hit by unauthorised payment charges.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Nigel Barker-Smith 17th May 2012 at 2:06 pm

    I agree, for the sake of clarity ban commission AND advisor charging. Keep it simple and get the client to pay directly by a cheque or BACs.

    Beware gentleman (& ladies) RDR part 2 in Holland has just evolved into this. No product provider intervention whatsoever.

  2. James Hurdman 17th May 2012 at 2:56 pm

    After the (rather large) penny drops within the industry, I predict that advisor/consultancy charging via “traditional” products will gradually disappear. It will be much simpler for adviser remuneration not to interfere with CGT, 5% Bond withdrawals or unauthorised payments from pensions. Otherwise it will become very messy and part of the clients’ tax planning would have to take account of how they are paying the adviser – complication that no-one really needs.

    However, the cash facility of a Wrap account could/can facilitate this – there just needs to be enough cash in there to pay the initial/ongoing fees.

  3. Dominic Thomas 19th May 2012 at 12:08 pm

    I have to admit to failing to understand the logic of advice in the corporate world falling under different rules to the individual world. One of the cornerstones of RDR was clari of charges, not influenced by products or Providers. Given that corporates can actually offset fees as a business cost, the only reason I can see for not applying the same rules is that the expense of advice would be high and is currently/historically been fudged by commission. I wonder if the FSA and/or Govt have understood this and are actually worried about take up rates? And the huge problem of getting low levels of investment on an advised basis. Surely this is where simplified advice has a proper role to play?

  4. The sad thing about all of this is many consumers will simple not pay up front for buying into what is an intangible product. The positive aspect of ongoing trails/renewals was to effectively be in partnership with a client to provide growth and be rewarded as a consequence of providing that. Paying up front is a step into the unknown and will take years to catch on if at all. The IFA distribution channel in this time will shrink and become unaffordable for most. Some providers will go out of business and there will be a massive savings, retirment and protection gap that will come back and seriosly affect future governemts.
    The simplest thing to do is to postpone RDR until most of the problems and unintended comsequences of adviser charging have been resolved. The FSA seem to have created a monster with scant regard for IFAs and how to establish a workable business model.
    A sensible solution is needed and it’s not too late to make the U turn!

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