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FSA clarifies adviser charging rules

The FSA says where adviser charges are paid through a product, providers can deduct the charge before or after the client’s money is invested.

In an RDR consultation paper on adviser charging, published today, the FSA says providers can either pay the full amount received from a client into a product and then deduct the charge, or can deduct the adviser charge from the amount received and pay the remainder into the product.

For product sales data, providers must report the amount paid into a product, irrespective of whether adviser charges have been deducted or not.

The FSA says this applies to vertically integrated firms as well as firms facilitating payment for a third party advice firm.  

Where a client cancels a product after the adviser charge has been paid, the FSA says refunds from the provider can be net or gross of the adviser charge. It says it is up to providers and advisers to agree a procedure, as long as it is made clear to customers in advance of any sales.

The FSA says where a customer is not required to pay an adviser charge if they do not purchase a product, the refund can be made net and the customer would then need to contact the adviser for a refund.

It says if the adviser charge has not yet been paid to the adviser, the refund could be made either gross or net, subject to any HMRC or DWP rules.

Where a consultancy charge is facilitated through a group personal pension that is an auto-enrolment scheme, DWP rules apply instead of FSA cancellation rules.

The DWP rules require refunds to be paid gross, so if a consultancy charge has already been paid to the adviser, the provider would need to seek a refund of the charges from the adviser.

If an adviser charge for individual advice to a member of a GPP is being facilitated through the product, the refund to the customer on cancellation would also need to be paid gross. The provider would need to seek a refund of any charges already paid from the adviser, who would then need to contact the customer regarding payment of any outstanding adviser charge.

The consultation will close on January 10, 2012.


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

  1. Has anybody else like me with there constant interfering lost the will to live!!!!

    What a complete shambles!!!

  2. It looks as if very little will change!
    This whole debacle has cost millions to the tax payer by the mandarins at the FSA. Surely these idiots should be held accountable for this mess.
    They could not run a minauge

  3. Am I missing the point of charging for advice like all those wonderful Solicitors, Accountants etc.. who wouldn’t give you your money back if you don’t want to go ahead with their advice! I thought the whole idea of charging for advice is that you have provided your client with advice or recommendations and if they choose not to proceed or cancel they don’t receive a refund!!!

  4. Where a client cancels a product after the adviser charge has been paid, the FSA says refunds from the provider can be net or gross of the adviser charge. It says it is up to providers and advisers to agree a procedure, as long as it is made clear to customers in advance of any sales.
    This makes no sense as I thought the whole idea of RDR was being paid for advise how can a client get fees back.

  5. To Anonymous 1.06pm agree

    what a complete waste of time and money. mind you it is very easy to spent someone else’s money, when you are not held accountable, the fsa are experts in this field

    you can see it now, go back to when RDR was first on the agenda. Lets see what we(the fsa) can cook up for the next how many years to make us look as though we’re doing something and will keep us in a job! and then, change very little

    Total bloody disgrace

  6. Do you really think that the provider will contact each FA & agree a method of compensation?

    I cannot beleive we are so close to “dooms day” & we are being told advice is now free? If unhappy cancel contract & FA has to refund the provider?

    What’s happening @ the FSA! This in reality means there has been no real change to how services are paid for today except the name has changed from commission to adviser charge.

    Sorry, this is not good enough FSA. Being a democratic country we should have a vote of confidence, FSA out / in!!!!

  7. As an Independant Mortgage Broker the FSA now want me to charge and not receive a commission/procuration for my advice and services. My concern is that the protection side of my sales/advice business is the smaller % and if I don’t get any commission for that service I’m sure less of my clients will take up protection policies.

    Less and less of people are already not taking up protection. The FSA should be looking to get more and more policies into the market place not less and less.

    Only for the rich then….

  8. I’ve looked at my diary and it appears it’s 10th November.

    That’s a worry, because having just read the latest pile of drivel from ‘they who must be obeyed’ I was convinced it was 1st April.

    Is this a joke?

    Even Hector (I can’t be held responsible for anything) Sants must surely have the decency to be embarrassed by this.

  9. If I’ve understood this right, it’s not the same as expensively renamed commission, is it?

    Most commission historically has been paid out of the distribution costs of the provider. And effectively at no cost to the client, as they would pay the same by ‘going direct’.

    But Adviser Charging will be directly out of the Client’s pocket one way or another. The product providers will now get ‘free’ distribution.

    Or am I missing something?

  10. @Attenborough, I hope that’s not your real name!
    Yes you have missed a lot over the last few years as I suspect have your clients.
    Commission – The no cost option Mr Client, now your going to have to start paying, Do you still wait up to see if you can catch a sight of the Tooth Fairy as well.
    Sadly this post alone by ‘Attenborough’ proves the need for RDR and the good that this change alone will make.
    Gawd help us

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