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FSA writes to providers over adviser charging disclosure concerns

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The FSA has written to product providers and platforms outlining concerns about the way adviser charging arrangements are disclosed to clients.

The letter, which has not been made public, suggests some firms have not put in place appropriate processes to ensure existing remuneration arrangements, including fees, have been disclosed to clients.

An FSA source says: “We are specifically asking firms who facilitate adviser or consultancy charging to obtain and validate client instructions.

“We have seen different approaches from product providers and service providers and we are concerned that some of these approaches will not meet this requirement.

“The purpose of the letter is to remind firms to review their approach against the RDR requirements to see if they need to do any further work.

“If the provider is facilitating an adviser charge, they will have to obtain and validate a client instruction. If they do not have the client instruction they will have to contact the client to get it. Some firms are relying on existing client consent arrangements but that may not meet RDR requirements.”

The FSA will carry out supervisory work next year to ensure the approach firms have taken to adviser charging is in line with its rules.

An FSA spokeswoman says: “To be clear, we are not saying that all existing arrangement are non-compliant post RDR – just that firms should not automatically assume that they can continue existing arrangements without checking that they are compliant with the new incoming rules and guidance.”

Standard Life has written to advisers detailing how it has interpreted the FSA letter.

In the letter, seen by Money Marketing, Standard Life UK retail director Graeme Bold says: “This week the FSA wrote to all major providers to confirm it is not acceptable for providers to re-label any existing remuneration as adviser charging without careful consideration of the RDR rules and controls to ensure that the client’s instruction is ‘obtained and validated’.

“Put simply, a provider should not consider any existing remuneration, including fees, to be compliant with the adviser charging rules unless they have confirmed it was agreed and disclosed with the client to the standard set out in the new rules.

“In particular, the provider should validate the instruction to pay this remuneration directly with the client.”

The Lang Cat principal Mark Polson says the letter raises concerns about the adviser charging compliance procedures adopted by platforms.

He says: “Platforms are saying we have this in place already, but this throws their position into doubt. They may have adviser charging but do they have mechanisms in place to ensure they have confidence that advisers have explicitly agreed those charges with the client?

“If they do, how is that evidenced and how often do they check it? I am concerned for some of the platforms that do not have procedures in place and are saying they are just a facilitator. I think the FSA has been very clear here that is not enough.

“I do not think Standard’s approach is unreasonable and I expect other providers to take a similar stance.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. The FSA has dug its own hole and now its trying to make sure its the platforms who take the blame when an adviser has been overcharging a client! Had they listened to the indusrty and had an ounce of common sense they would have set commission limits that providers can payand hey presto the problem of overcharging is dealt with at source!! its a shambles from start to finish!!

  2. and there’s silly me thinking there was only 66 days to go….

  3. We use the Standard Life wrap and we initially thought thay they had gone completely overboard as far as adviser charging is concerned in comparison with other wrap / platfrom providers that we use. Now we’re worried that the other providers we use have ‘undercooked’ it. Should we be worried or are Standard Life just trying to justify the level of complexity that they have thrown at the the whole thing?

  4. As a frequent user of Standard’s Wrap I have to say they are on the ball with all aspects of RDR they seem miles ahead of the rest of the guys , for example Nucleus aren’t doing anything as they are “assuming” their platform is compliant already. I can see the FSA hitting them hard. Granted there is a lot of compliance but going forward I suggest getting onto Standards now before the other platforms go t!ts up

  5. I thought you may wish to see this !

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