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FSA kicks off adviser charging thematic review

Rory Percival FSA
FSA technical specialist Rory Percival

The FSA is writing to firms to begin its assessment of how they are disclosing the cost and nature of their advice services post-RDR.

The regulator has set out how it will carry out its thematic review into adviser charging and scope of service, which will take place over three six-month cycles.

The FSA is sending out a questionnaire to 50 firms today which will look at how they “devised, disclosed and are delivering” adviser charging and their advice services. The regulator will ask firms at what stage they disclose details about charges and services to clients, the controls in place, and to provide copies of disclosure material.

The firms have been chosen to reflect large, medium and small firms, and those who are operating as wholly independent, wholly restricted or running a hybrid model.

From the original 50 firms assessed, 20 firms will then be subject to a more detailed review which will involve an FSA visit and client file assessments. File assessments will be focused on disclosure rather than suitability of advice. The 20 firms will be chosen as before based on a representative sample of the market and not based on the firms who are the least compliant.

At the end of the initial six month cycle, the FSA will publish good and poor practice examples.

Speaking to Money Marketing, FSA technical specialist Rory Percival says this approach is in line with that of the new regulator the Financial Conduct Authority which will focus on intervening early before risks materialise.

He says: “We have had a lot of queries about value for money, and how can the FSA judge whether advisers are providing value for money. The answer to that is simply and emphatically, we are not. The only person who can judge that is the client, and that is why disclosure becomes pre-eminently important.”

The second cycle will run between June and December, while the third cycle will run in the first half of 2014.

Percival says: “The first cycle is about providing a supportive approach to the industry. Clearly by the time we get to cycles two and three, we will have set out our expectations more clearly with examples of good and poor practice and so will expect firms to be embedding the right practices by that stage, with the reviews having more of a compliance focus.”

He adds the regulator will be focused on adviser explanations of what services clients are getting at what cost, and says the FSA would have concerns where fees examples are not given in cash terms, such as based on percentages only.

The thematic review into adviser charging and scope of service is separate to the data the FSA is collecting on advisers who have met RDR professionalism and qualification standards. The FSA is calling on firms to submit their qualifications data after around 15 per cent of firms failed to do so by the 29 January deadline.

The regulator is also to carry out a separate thematic review into non-advised sales, which will include so-called “market distortions” where firms are creating ways to circumvent RDR rules.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. These are like RMAR questions… Perhaps another should be – “How much extra does it cost you to deal with all the non-thought through, unintended consequences of RDR, and how much more will this cost customers?”

  2. Does the FSA do this with solicitors and accountans?
    What next will they devise to waste out time and industry.

  3. I have a number of clients whose pensions contain GARs, the provider will not pay adviser charging and I no longer pay commission (advised or non-advised) therefore I have now had to invoice the clients for my services. Needless to say the provider has not enhance their usual rate any further. Therefore, the FSA have increased the client’s cost, I’m not quite sure this reflects their intention. Misguided fool who don’t think things through.

  4. I must be wrong – but I thought the Financial Services Act 2012 having achieved Royal assent came into force on 1st April 2013 which abolished the FSA & the FCA took over? How can the FSA carry on into 2014? Is it the FSA that messed up on the Horsemeat that will carry out the review? Must be something about the acronym – FSA!

  5. “From the original 50 firms assessed, 20 firms will then be subject to a more detailed review which will involve an FSA visit and client file assessments. File assessments will be focused on disclosure rather than suitability of advice.”

    So will these visits be conducted by level 4 qualified FSA / FCA staff ? will they have the relevent qualifications to be able to pass judgement on the files they assess ? will they have any qualifications full stop ?

    No ? of course not !! if they dont understand or if their uneducated minds think a file is unsuitable they will just whip out a 166 to get a skilled persons report which will cost the IFA in question thousands !!!

  6. So as long as the disclosure paperwork is issued in a timely manner, tickboxes sorted, to hell with the consumer outcomes.
    You couldn’t make it up could you!

    How much per year is the joker who is supervising this nonsense paid?

  7. And let’s not forget the next revied regarding customer detriment due to the RDR implementation resulting in firms becoming insolvent!!!!

  8. Is this review being done because they now realise that with thousands of advisers leaving the industry, there will be less people to fund their ridiculous salaries and dubious ideas?

    It all goes to show someone at the top is concerned that banning commission is going to result in consumer detriment, so rather than take a step back, they are working towards blaming “fee hungry” advisers if the consumer is losing out by being charged twice, once when the product was set up and a second time on fees for topping up.

    I don’t like to grumble (as if!) but isn’t this a bit too early to guage whether firms are up to speed and whether it is working for the benefit of consumers?

    We all know it isn’t and never could work, but it seems a little too hasty to conduct a thematic review of arrangements less than two months in to the RDR world.

  9. Before you go into a restaurant you can look at the menu & prices as by law they have to be displayed outside of the venue.

    Likewise, IFAs should clearly set out their pricing policy on their websites so consumers can make meaningful decisions before they start the ball rolling.

    Having looked at the disclosures of a number of firms in London disclosure is either completely missing on their websites or is seriously misleading (such as be charge a % of funds invested as industry standard).

    The FSA needs to show its teeth on this point and start fining people over this.

  10. Richard | 19 Feb 2013 11:27 pm

    When you go into a restaurant you know exactly what you are ordering and the restaurant knows what it costs to make and earn a profit.

    Financial advice doesnt work like that if a full review is carried out so it is impossible to quantify what will be paid as this will vary from client to client.

  11. Anonymous 20 Feb 2013 12.30pm
    Why should it vary from client to client if you charge an hourly fee then surely you should be able to make a reasonable estimate after understanding what the client wants to achieve? In any event as long as the client has a decent idea of what they are likely to pay in advance of committing to anything then that would seem reasonable to me, and I think that’s what the regulator wants?

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