From 2012, all IFAs must agree fee-based remuneration with their clients through adviser charging. Firms will be allowed to charge a fixed fee, an hourly rate or a percentage of funds invested.
A ban on factoring has also been proposed by the FSA, meaning that providers will no longer be able to advance finance to advisers out of their own funds. The FSA says advisers will be able to set up commercial credit arrangements with clients.
The RDR consultation paper is also proposing that ongoing charges should only be levied where a consumer is paying for an ongoing service, such as a regular review of the performance of investments.
The paper says competition should be retained through product prices and different distribution channels.
Albany Financial consultant Kelvin Lillywhite considers that the proposals will not make much difference.
He says: “Many pension and investment products have factory-gate pricing built into them now, so advisers are used to having conversations with their clients about remuneration. This will just create a level playing field with those who have chosen to avoid having these conversations.”
But Belgravia Insurance consultant Paul White says this may lead to a socioeconomic split between those who can afford to pay a fee and those who decide independent advice is too expensive.
He says: “This may lead to many people being left unadvised as they are pushed towards the banks. We have to remember why commission came about – there are times when an adviser is telling a client they should do something they do not necessarily want to do, and it is easier to not include fee conversations in with that.”