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FCA hands out ‘early report card’


The FCA has published what it calls an “early RDR report card for the industry”, with good and poor practice examples for firms to test their compliance.

The FCA’s thematic review, published last week, gives guidance to firms after the regulator found issues with adviser disclosure around charging and whether firms are independent or restricted.

It gave the positive example of one firm with flat percentage charging which provided a range of cash examples of the cost of advice based on investing £20,000, £50,000 or £100,000.

Poor examples of charging disclosure included a firm which described its adviser charge as a minimum of £1,500 up to £5,000, with no added detail.

On independent status, the regulator cited a firm claiming to be independent that directed 98 per cent of its business to one platform, and told clients at an early stage that advice would involve using this platform.

The FCA also said firms were failing to clearly explain ongoing services or that ongoing charges could be switched off.

It gave a good practice example of a firm which used a table to show the differences between two levels of ongoing service.

NMG Consulting model for good disclosure

Initial charges: 3 per cent on the first £100,000 of your investment, then 1.5 per cent on any amount over that.

Ongoing charges: 0.5% per annum

Example costs To set up a new investment of £50,000 would cost £1,500 (3 per cent of £50,000).

To set up a new investment of £200,000 would cost £4,500 (3 per cent of first £100,000 = £3,000, plus 1.5 per cent of the remaining £100,000 = £1,500.

One year of ongoing service on the £200,000 would cost £1,000.

The amount of the ongoing charge may increase as the fund grows.

Source: NMG Consulting



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