The industry is divided as to whether it is acceptable for providers to compensate advisers at less than their hourly rate for time spent resolving client complaints.
Some providers, such as Aviva, limit compensation at a set rate regardless of the advisers’ fees. Essential IFA managing director Peter Herd settled out of court with Cofunds in June after the platform initially refused to pay Herd compensation for service errors.
Speaking at a recent Money Marketing roundtable, Herd said: “If the provider has caused a problem, compensation should be at the adviser’s full hourly rate. We are not the provider’s employees but their clients and should be treated as such.”
Aviva RDR implementation manager Ross Anderson said: “We need to ensure any payments made are for losses directly incurred by the adviser and we also need to ensure those payments are not considered to be inducements. It is a very big problem, not just for providers but for advisers.”
Cofunds head of investor and wealth distribution Andy Coleman said: “Advisers should be remunerated appropriately for the time they have spent. Giving advice incurs certain costs for firms, whereas performing an administrative task could be considered to incur a different hourly cost.”
IFA Centre managing director Gill Cardy argued time taken to resolve a complaint is time that could have been spent on another client.
But CWC Research managing director Clive Waller said: “The starting rate has got to be an admin rate. If you are doing bricklaying work, you cannot be paid as an architect.”
Institute of Financial Planning chief executive Nick Cann said: “A step forward would be to have a service agreement where paying compensation is viewed as being acceptable. In reality, the level of compensation paid would have to be a balance between adviser and administration rate.”