IFAs will have to compare how the commission they get adds up against the market average, according to long-awaited FSA proposals for the menu-based system of payment published last week.
The menu was finally released last week after significant delays alongside a feedback statement to CP166 outlining the final depolarisation rules. The menu will oblige all advisers, whether tied or independent, to tell consumers what they charge and how that compares to the market.
For all collective investment products, including regular and single premiums, advisers will have to show clearly how much clients can expect to be charged for advice, whether through commission, fees or a combination of the two.
The FSA is sending out a survey to providers to determine what the market average is for different product areas.
The document, which will have to be handed out to consumers at the beginning of the advice process, will be branded with the key facts logo and entitled, Key Facts: A Guide to the Cost of Our Services.
The menu has five main sections to help consumers understand the cost of advice. It states the firm is regulated by the FSA and outlines what services are provided.
It describes payment options available and explains how much services would cost as compared to market averages as well as other information including contact details for the regulator.
The FSA will be consulting on the proposals until June 1 with final rules expected in the second half of this year.
Firms will be able to take advantage of depolarisation including the menu during a six-month transitional period starting from the date the final rules are made.
FSA head of retail projects David Severn says: “We want consumers to be clear about the amount of commission being paid so they can have confidence that the financial advice they get is not being influenced by the level of commission.”