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FCA to review advisers’ ongoing charges

Regulator follows up results of suitability review with questions on nature of ongoing relationships

Spotlight on charges 700x450.jpgThe FCA has contacted advisers for more information on their ongoing services and charges after a review of the market found more than 40 per cent of IFAs breached disclosure rules.

The FCA completed a review of around 650 advice firms earlier this year, finding that, while 93 per cent demonstrated suitable advice, 42 per cent did not meet disclosure standards, and a further 5 per cent were rated as uncertain.

The regulator has now sent a follow up information request to 45 advice firms, Money Marketing has learned, to better understand the nature, scope and delivery of their ongoing services and charges.

The firms are understood to come from a broad sample and include both independent and restricted firms.

The work forms part of the regulator’s general supervision of the sector and will be used to decide if further action is needed down the line.

In its suitability review, the FCA said that initial disclosure was the main area it found unacceptable results. It highlighted concerns including where firms did not estimate the length of each service after disclosing an hourly fee structure, and where they used charging structures that had a wide range.

The FCA said when it released the results of the suitability review that it would be part of an “communication programme which will run over the course of 2017 and into 2018” and would share good and bad practice examples as part of this.

Two senior staff at the FCA will be discussing suitability and disclosure on our panel at the Money Marketing Interactive conference, which is being held at the Majestic Hotel in Harrogate on 14 September. To join over 100 advisers and register to secure your free place, click here



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. It is a shame the regulator cannot complete the work it really needs to be completing ASAP with the same interest, vigour and speed they are with advisers charges.
    Pension freedoms and DB transfers will cost Billions in retrospective regulation, will put consumers in financial difficulty, advisers out of business and cause PI insurers to leave the market. Yet they seem hell bent on advisers costs, not what process and advice is correct.
    May be it is time advisers wait for the regulator to actually clarify, force their hand by refusing to transact until some certainty is achieved.
    PI insurers are already starting to refuse renewal of policies for adviser business that have undertaken large volumes of DB Transfers. With only 4,500 pension specialists in the UK this would imply within a very short period we will have non able to advise.

    • Prioritisation has never been the FCA’s forté. It prefers to fiddle whilst Rome burns (and Rome really is burning, is it not?) One is reminded of the Italian fire fighters who’ve gone out starting fires in the middle of the night so as to boost demand for their services.

  2. Robert Milligan 8th August 2017 at 12:31 pm

    Networks would fall by the wayside if Trial and on-going adviser charging were stopped, We have seen Intrinsic and others introduce a 1% on-going charge, this is unacceptable as a % of which is retained by the network, hence the adviser has to charge a higher fee as they want their 0.5% . The Network model is de-funked, post RDR, how do they explain the higher charges, its untenable, That’s why the FCA are looking into it.

    • Rubbish. Firstly, networks don’t dictate what member firms charge their clients and secondly, taking into account all the things that DA firms have to do for themselves (or contract out to third party service providers such as compliance consultants), membership of a network isn’t actually much costlier. Therefore, it isn’t necessary for network member firms to charge their clients any more than DA firms (I certainly don’t) and there are plenty of DA firms that charge 1% p.a. ongoing.

      • Robert Milligan 18th August 2017 at 3:38 pm

        If you would like I can send you an completed complaint against Intrinsic where the Restricted Adviser has implemented a 1% On going Adviser Charge, and advised investing simply in one fund in a AEGON SIPP and used the O/Mut Cirilium Mod R fund making it a total amc of 2.9%, For the past thirty years I have never taken more than 0.50 on going/Trail, and I feel their can be no justification for doing so, any additional work can be charged adhoc.

  3. “It highlighted concerns including where firms did not estimate the length of each service after disclosing an hourly fee structure, and where they used charging structures that had a wide range.”

    Advisers are stuck between a rock and a hard place. I completely agree that the pounds and pence figure needs to be disclosed to any potential client before agreement to proceed but does the FCA realise just how hard it is to figure out how long it is going to take to give advice when each case is different from the last.

  4. I think the headline is misleading. They are not actually reviewing the charges – just the disclosure of those charges. The regulator has no authority to interfere with charges provided they are properly disclosed. If properly disclosed and the client agrees you can charge £5,000 an hour.

  5. Neil Liversidge 18th August 2017 at 3:44 pm

    I do not accept the ‘42% inadequate’ figure. Our disclosure was classed as inadequate. We went backwards and forwards with our argument and eventually the FCA accepted that our disclosure was in fact perfectly clear and adequate – they had failed to read that which was plain to see and under their nose. The FCA has gotten away with this statistical nonsense due to advisers’ failure to engage. Unfortunately, most are so terrified of incurring the FCA’s wrath, they don’t argue when they should. Every single firm whose disclosure was deemed inadequate should now be looking closely at the FCA’s reasoning, looking at their disclosure, and if appropriate, challenging it as we did. I bet that if all did this then the ‘inadequate’ number would soon come way down to something more realistic.

  6. Harry has this nailed. We just need to be transparent so that there are no surprises for clients. Declare your income in pounds and pence at every opportunity and justify it.

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