Costs of adviser charging “grossly underestimated”, says Ernst & Young

Ernst & Young claims the FSA has “grossly underestimated” the costs to the industry of shifting to an adviser charging model in its Retail Distribution Review consultation paper, published yesterday.

Financial services partner Shaun Crawford says: “The ban on commission and its replacement with adviser charging alone will be hugely expensive and disruptive for the industry.

“And questions remain. For example, what proposals, if any, will the FSA put in place to help adviser firms transition to fee-based models? How will adviser charging work in practice when, these days, most investment propositions are multi-fund based?

“It is our view that the costs to the industry of shifting to an adviser charging model have been grossly underestimated. The FSA has made clear that the transformation involved in RDR implementation will be expensive for distributors and providers alike.

“It estimates that an investment of close to £500m will be shared across the industry by 2012 – staggering. This of course comes on top of a range of other industry initiatives such as preparing for Solvency II and implementing TCF.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. So, what’s new eh?
    Tell me something I don’t know about these regulators, they couldn’t catch a pig in a poke, failed to stop the banking system falling through the regulatory gaps and cannot work out how much each hairbrained scheme is going to cost. But what do they care? I feel like becoming a ‘consumer’ champion like Nic Cicutti, he asked for details of the Which? ‘recommended’ mortgage endowments, I sent them to him, guess what, no comment. Very selective jouro that man.

  2. How true!!
    Thank god for somebody speaking out! Clearly the FSA have their heads in the clouds with commission charging. Commission payments work, however some advisers may abuse it, though that is the same as any industry! Instead of penalising the clients and in turn all the advisers, how about you standardise commission across the industry. i.e. a pension lump sum or transfer has a maximum of 6% initial. Even HNW clients are usually not so keen to pay fees. The bottom line is that the system works however maybe some standardisation would be better than a complete change to stop any abuses, if there are any? And amazingly there would be little cost in stanardisation and clients would not lose access to good financial planning advice

  3. Costs of adviser charging “grossly underestimated”, says Ernst & Young
    On what data has the FSA based its assumptions of the financial impact of the transition to fee based charging? The FSA proclaims itself on the homepage of its website (fsa.gov.uk ~ funny that, for a body that claims to be entirely independent of government) to be “an open and transparent regulator”. So show us what you’ve got.

  4. Adviser Charging and the RDR
    Thank God we advisers have some ‘big hitters’ like Ernst and Young batting on our side. The FSA were told eons ago that abolitioning commission was idiotic. Now they know it is !! How is it that we have a Quango telling us how we are paid, and incidently how much!! They (FSA) are ‘all right Jack’ with their senior managers and execs earning stupid money that the likes of myself, providers and fellow IFA’s have to fund. How do providers pay? By reducing commission meaning ultimately the IFA sector pays twice; clever FSA. It makes my blood boil to think that these people at the FSA have not a clue how our industry works, have in all probability never had to SELL an Investment, or Protection contract let alone advise on one. They would not last a month in our field if they had to make a living in the real world. With all due regard to accountants, some of whom are my closest friends, I feel that the FSA is ‘run’ by a bunch of failed accountants who are intent on hitting the IFA sector hard (why, I have no idea) and at the same time feathering their nests with the blessing of the treasury and this totally discredited Government ALL AT OUR INDUSTRY’S EXPENSE. WHAT’S MORE, THERE IS NOT A DAMN THING WE CAN DO ABOUT IT EITHER, BECAUSE THEY DON’T LISTEN TO THOSE AT THE SHARP END AND NEVER WILL. Sad, isn’t it !!

  5. Re:-Ernst & Young Comments
    Any else notice the Money Marketingjobs.com ad at the bottom of this piece? The obvious answer to the Question posed re “The best jobs in Financial Services” is to become a member of the FSA Gravy Train. The rest of us in this once proud profession can go hang, as nobody in real authority has the guts to stand up for us and overide this manic monolith

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