The FCA has published a statement reminding firms that clients can pay for advice on lump sum investments in instalments.
The statement follows a recommendation from the Financial Advice Market Review that the regulator should draw advisers’ attention to how they can flexibly charge clients for advice on such investments because firms were not taking advantage of the rules.
The FCA’s current guidance says that initial adviser charges for a lump sum investment should be paid upfront – either as a separate amount paid to the adviser or by deduction from the investment – except for two situations.
These are if the charge is for an ongoing service for providing personal recommendations or related services, or if the charge relates to the initial advice for a regular payment product.
Where those two exceptions do not apply, firms can offer a client credit to pay for an adviser charge, provided it “would be in the best interests” of the retail client.
The FCA statement says some FAMR respondents felt the rules brought in through the RDR had removed some flexibility in the way advisers can charge retail clients for advice on lump sum investments.
The statement says: “The FAMR report said that installment-based payments could make financial advice more affordable and accessible for some consumers, provided that the terms of the installment payments were clear and fair. The report noted that firms do not appear to be using the flexibility already permitted by the rules to offer more convenient payment options to consumers. It recommended that we draw firms’ attention to the flexibility available.”
The Personal Finance Society has previously said client-agreed remuneration – where a transparent fee is recovered from regular investment premiums – is a logical step to help clients who are put off advice because of initial fees.