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Aviva slams cash account charges

Aviva has hit out at platforms and fundsupermarkets who charge a margin on money held in cash accounts.

Speaking at a platform seminar in London today, Aviva Wrap head of marketing Nicholas Burton criticised platforms who impose charges on cash accounts, typically 1-2 per cent,claiming it is “like a back door to take additional charges from customers”.

Burton said: “The FSA did identify in its consultation paper that most platforms tend to have big charges on money held in cash accounts. That is something the FSA will be watching very carefully because it is a bit like a back door to take additional charges from customers. That is another reason why you have to know the split of who is getting what.”

Burton also called for the FSA to decide whether adviser charging will be subject to VAT.

He said: “This is one area of adviser charging where the FSA has made a dog’s dinner. The FSA has given no clarity whatsoever on whether it is subject to VAT or not, and it has fudged it by saying it is a matter for HMRC. HMRC has said they are looking at it and expect to come out with a view prior to implementation of RDR.

“That is one of the points we will be lobbying very hard on in our feedback statement at the end of May.”  

He also questioned the future of the fundsupermarket model and the use of model portfolios and guided architecture.

He said: “The business model does not allow advisers to give whole of market advice. The only way that can change is by adopting a wrap model. A wrap model is not dependent on rebates and therefore can provide access to equities, exchange traded funds and the like.”

He added: “The fundsupermarkets tend to use mechanisms to win negotiations with the fund groups. Customers investing in funds that are there only because the platform is getting a higher level of rebate may be in a position where their investment choice is being biased by the level of rebate that is paid to the platform.”

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. Interesting…can Mr Burton confirm that Aviva will include access to ALL asset / fund managers on its platform?

  2. You must be joking 14th April 2010 at 2:40 pm

    My god! I thought I was actually going to agree with Nick Burton and Aviva for one terrible moment there!!!

    Infact, I do wholeheartedly agree that holding deposits on a platform is likely to be the next scandal… I posted such comments in my exchange with Novia last week… just an excuse for the platform/IFA to charge more!!! Tut tut!

    But then Nick blew it with the “unbundled – who gets what” comment.

    If you really believe in that, you should be insisting that banks quote a TER on deposit accounts. Why is no-one coming up with the arguement “banks make money from deposits, so that margin should be disclosed”???

    Oh, and Nick, you really showed your lack of grasp with the “equities, ETFs and the like” comment… yes, lets add them all to every platform, lets be totallyu transparent with charges – I GUARANTEE that you’ll then be saying “people are taking additional charges in respect of ETFs and the like as you are now with deposits”.

    I had a jack russell once that used to chase his tail. Even when he caught i, it was of no benefit to him… welcome to the world of unbundled!

  3. Of course adviser charges will be subject to VAT, solicitors and accountants fees are so IFAs must be the same, it’s bloody obvious even the twits who support the RDR must realise that.

  4. Excellent news! So does this mean Aviva will be reducing the 1.25% AMC it levies on the 27.5% (28/2/10) cash holding in its £1.725bn Property fund?

    Thought not.

    Best put your own house in order before you start on providers with tried, tested and proven wrap propositions.

    There really is something quite odious about Aviva’s second attempt to break into this market by either bribing advisers or creating issues where none really exist. It all smacks a little too much of desperation that to me suggests a poor core proposition.

  5. You must be joking 14th April 2010 at 4:12 pm

    A very well put point (re. Aviva’s property/cash fund)…

    I assume Mr Burton lives by the old “all publicity is good publicity” ethos, hence the continual attempts to be in the press…

    Ah well! Now where’s that bloody Jack Russell??!?!

  6. You must be joking 14th April 2010 at 5:19 pm

    For Michael

    Adviser fees in respect of the provision of advice are currently and always have been subject to VAT (subject to VAt thresholds of course).

    Adviser fees/commission in respect of intermediation are currently not subject to VAT.

    On that basis, it is not correct to assume that adviser fees will be subject to VAT as this will depend upon, as has always been the case, what the fee is in repect of, i.e advice or intermediation…

    Notwithstanding that, it will certainly lead to greater confusion!

    Now who was it who said “our objective is for greater clarity for consumers”??? 🙂

  7. The FSA is right to say that only HMRC can determine VAT liability – it is complex.

    In short, “advice” will usually be fully vatable. However, some (but not all) “intermediation” services are exempt from VAT. For IFAs, those are intermediation services in respect of insurance products (Group 2) and certain Financial Services (Group 5). BUT the list of financial services is pretty limited – so many “intermediation” services will also be VATable because the intermediation is in respect of something which doesn’t fall within the limited Group 5 exemptions.

    Check it for yourselves (if you can face it…) by reading http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1994/cukpga_19940023_en_34#sch13.

    And don’t assume that commissions and intermediation services are always exempt.

  8. Mr Burton has an absolute cheek. I recently discovered that the AVIVA Cash Fund has been “providing” a negative return for some time as the AMC is more than the interest being earned. When I challenged them on non-notification to clients the response was along the lines of “it’s in the small print”. There is very little difference between this and the scandal of what happened with Standard Life.

  9. What about SIPPs? These lightly (non) regulated entities were taking non disclosed margins – just like solicitors client accounts – for years, and often kicked back to scummy advisers. Thieves will always be thieves.

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