View more on these topics

Euro rules stop total commission ban

The FSA has set out plans to remove commission bias by stopping providers from determining adviser remuneration, but says Europe has stopped it going as far as it wanted.

It has ruled out a total ban on commission for now, partly because it may contravene the European Mifid directive, but the retail distribution review feedback report has said independent adviser firms must remove provider influence over adviser remuneration and set their own charges for advice. Both independent and non-independent advisory firms must separately disclose the cost of advisory services and product costs.

Providers will not be able to predetermine commission levels or include commission within product prices for IFA firms.

Product providers will still be able to have adviser costs deducted from their investments but factoring, payments made by providers out of their own funds and typically used for indemnity commission, will not be allowed after 2012.

The FSA has said that IFAs will be expected to set their charges in advance of client meetings, rather than on an ad hoc basis, and make it clear what services clients are to receive.

Clients should also be offered a range of payment options, such as an up-front fee, spreading the charges over several regular payments or having the charges deducted from an investment.

The FSA will be consulting on the changes next year, with advisers required from 2011 to set their own charges, with rules stopping providers det- ermining or pricing commission products coming into effect in 2012.

Evolve Financial Planning director Jason Witcombe says: “It would be a more level playing field and more transparent if commission was removed. But equally, allowing clients to pay for advice through factory gate pricing will help them with their cashflow if required.”

Recommended

Tax cuts could spur on more savings, reveals Axa

Tax cuts predicted in today’s Pre-Budget Report could see an extra 43 per cent of Brits putting the extra cash into a savings account, reveals research by Axa.

Direct threats

Money Marketing broke the news last week that the former founders of Webline, Park Row and Quay software are teaming up to launch a direct-to-consumer wrap platform.

Thumbnail

Case study: administration — managing group life schemes

Our client leads the global market in high-tech electronics manufacturing and digital media. The trustees of the company’s final salary pension scheme insure death-in-service lump sum and dependants’ pension death benefits for active employees, as well as dependants’ pension benefits for deferred members (those who have left service).

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment