With around seven months to go until the implementation of the retail distribution review it is worrying to find respected industry commentators raising significant concerns about charging models.
The fact these individuals have been passionate advocates of the FSA’s drive to increase professionalism and charging transparency should make the regulator sit up and listen.
As Syndaxi Chartered Financial Planners managing director Rob Reid eloquently expressed in a recent issue of Money Marketing, there are likely to be significant tax implications for both individual and group business when advisers take charges from the product in various scenarios.
Although charges for pension advice can be taken from the product, advice on other products, such as Isas, cannot, even though they may well form part of the same advice process. Implementation costs also risk an unauthorised payment charge.
Not allowing implementation costs to be taken from the product gets even more troublesome with consultancy-charging. Money Marketing revealed this month that HMRC is working on revised guidance in this area but could not confirm when it would be ready.
Another payment option is using a platform cash account, although the FSA’s current position on banning cash rebates, despite the lack of evidence of market bias, is not helpful.
The ability to take charges from the product has been pushed by the FSA throughout RDR consultations as a means of ensuring advice remains attractive and affordable but industry commentators are warning of a mis-match between what advisers want and what providers are likely to deliver.
Earlier this month, Personal Finance Society chief executive Fay Goddard, a firm supporter of the RDR, warned in her Money Marketing column that advisers need reassurance that adviser-charging facilitation will be ready in time for January 2013.
Providers will be coming to market with a range of different adviser-charging methods which may or may not meet needs of individual advisers. This may worry the regulator that charging methods are influencing product selection but the ABI’s hands are tied to an extent as too much co-operation may breach competition rules.
Reid and other advisers have offered their help to the FSA and HMRC in finding solutions but the clock is ticking.
The regulator should not be afraid of pushing back the RDR’s timeframe if it means a smoother implementation of the rules for advisers and clients.