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Dear Rob & Roderic

Our resident agony uncles and The Ideas Lab directors Rob Reid and Roderic Rennison answer adviser questions

Rob & Roderic

Q. Incentives

I have read about the FSA’s latest paper, ‘GC12/11: Risks to customers from financial incentives’. Should I be concerned? 

A. Roderic

You need to read the paper rather than just an article or summary. It gives the FSA’s views on good and bad practice in relation to incentives, where responsibility lies in your firm and whether you should consider making changes. Although based on findings from analyses of firms with at least 20 advisers, the paper is applicable to smaller firms. Whether you should be concerned depends on your practices regarding incentives. The paper certainly provides a catalyst to review them.

A. Rob

It is also worth noting the comments made about self-employed versus employed advisers.

Q. Adviser charging

I am getting nervous about whether providers and fund managers will be ready to facilitate adviser charging by 31 December 2012. How can I get comfort?

A. Roderic

You are right to be concerned and the best way to address this issue is to draft examples of how you plan to take your adviser charges – both initial and ongoing – from contracts/platforms and to ask the providers/fund managers that you normally deal with to confirm in writing whether they plan to facilitate what you require or not. You can then plan accordingly.

A. Rob

Personally, I feel that over time many providers and fund managers will draw back from facilitation, and therefore you need to plan for that, looking at the platforms you deal with and those that will facilitate adviser charging.

Q. QCF Level 4

I have an adviser who is not going to achieve QCF Level 4 in time. What should I do?

A. Roderic

It has become clear in the past month that despite best endeavours, a number of advisers will not be ready in time. In some cases this will be due to their lack of application and in others due to genuine difficulties in passing the relevant papers. The reasons for their failure might influence whether you support them during a period when they cannot advise, or to decide that you will part company. You need to be mindful of employment law and your contractual obligations.

A. Rob

I would suggest that in some instances, advisers may not actually want to continue to advise on investments and therefore the protection channel may be more attractive/viable. Becoming an introducer is an alternative route, but needs to be treated with care given the regulatory pitfalls that exist, such as being seen to give advice. The appropriate systems need to be put into place to guard against this as far as possible.


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