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FSA concern over network wrap risk

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The FSA has warned networks may struggle to manage the risks posed by the different ways their appointed representatives use platforms.

FSA conduct and risk division supervisor Rory Percival told delegates at The Platforum conference in London last week that adviser firms will have to implement risk management and oversight changes under RDR.

He argued that networks in particular may find it difficult to manage the wide-ranging risks posed by their ARs due to the different ways advisers can use a platform within their business.

Percival said: “The risk management and oversight issue presents a slightly different challenge to the networks. We have seen that advisers use platforms in different ways.

“Where platforms are being used as tools that help advisory firms deliver service to clients, then the risks are likely to be specific to that AR and may vary from one AR to the next. As a result, there may be challenges for the networks in managing these potentially disparate risks.”

Percival also warned advisers using platforms to ensure ongoing services promised to clients at the outset are delivered and that attracting new business onto the platform should not be prioritised above the ongoing service.

He said: “Platforms are increasingly being used to provide ongoing services or to assist with these services being delivered. Where firms have agreed ongoing services with a client, there may be issues to consider.

“For example, is the adviser’s remuneration appropriately structured? It could be problematic if the remuneration structure encourages advisers to focus on new business at the expense of providing ongoing services. Also, can every firm demonstrate they are treating customers fairly by ensuring services are provided in practice and to the standard promised?”

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There are 2 comments at the moment, we would love to hear your opinion too.

  1. While I understand the concerns raised by the FSA, I find it interesting that we are being told that focusing on new business might be a problem. As an adviser I feel ongoing service is important. However, how many people can pay for it? Very few. The service model that we are being told to adhere to is probably only appropriate to ‘High Net Worth’ clients —- those able to contribute a regular contribution for the service. It ignors the vast majority of people who have ordinary but very real needs. Those who need to consider protection for the family against death, critical illness, and incapacity. These folks also need advice about the relatively low level of savings they can put aside. My experience is that people who want to pay the bills struggle to do this let alone set something aside for retirement. The only way for these cases is via commission. Any adviser worth his salt will keep in touch with clients like this because circumstances do change. The FSA must not neglect these clients, and the only way to offer them any service, is by going out and, I’m sorry, selling new business.

  2. “… the only way to offer them any service, is by going out and, I’m sorry, selling new business.”

    Arrant nonsense! If you’re going to do it for free because that’s the right thing to do, then stand up for what you believe in and JUST DO IT. Or you can go and volunteer with your local Citizens’ Advice Bureau, or CFEB, or Christians Against Poverty – whatever.

    But don’t tell me you HAVE to sell things to people so you can do good works for others – you either believe in “pro bono publicis” or you don’t.

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