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MM leader: Adviser charging set to get messy

Just over two months until the start of the FSA’s RDR adviser charging regime the regulator has felt it necessary to write to platforms and providers raising concerns about the way charges will be disclosed to clients.

The FSA is worried some clients who have their AC facilitated through a provider may not be clear on what they are being charged for, leaving the regulator open to the accusation that it is allowing ongoing commission by another name.

Under RDR rules, firms facilitating AC must “obtain and validate” that a client agreement is in place. To be clear, the onus and responsibility is on the platform or provider to ensure this is happening.

The FSA is concerned some have not got the right processes in place to check this, both for business falling straight under the AC rules and for when new advice triggers the end of trail commission and the start of AC.

The last minute nature of this correspondence does nothing to reassure those worried about the strain being put on the industry by the regulator’s decision to stick with the arbitrary 1 January deadline at all cost.

Whether the blame lies with a lack of earlier clarity from the regulator or providers misinterpreting the rules, the end result will be certain firms rushing to be compliant by January.

Providers and platforms appear to have different strategies to ensure they are abiding by the rules.

Some are asking for client signatures for AC to kick in while others will be sending out client letters confirming the charge and telling them to get in contact if they have concerns. Random sampling is another option.

We would hope and expect that any provider correspondence with clients is conducted via the adviser, rather than going direct. However, any advisers who have not yet clearly articulated their charging proposition to clients would be wise to ensure this is done before a provider letter tries to do the job for them.

Writing in this week’s Money Marketing, Syndaxi Chartered Financial Planners managing director Robert Reid suggests direct billing may become inevitable. The Lang Cat principal Mark Polson suggests direct charges may be the only way to avoid provider interference and “whose client is it anyway” rows.

Given the complications of provider facilitated AC, the wide range of interpretations we are seeing and retention of provider responsibility in the client chain, many advisers are likely to agree.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Let’s not forget that providers may not facilitate adviser charging either universally like M&G or for some of the range like Aegon, and only offer factory gate priced products … advisers have assumed too readily that providers would facilitate and we are beginning to see the first signs that the advisers may have assumed too much.

  2. We are already seeing the confusion, A good example is the recent Funds Network mailshot which informs clients they can switch off the advisers ongoing income in our case 0.5%. Recent meetings with clients show the confusion as clients have openly said why would they do that as we surely we would not do our jobs if not getting paid? A logical approach from some clients but I suspect there will be many who remain silent but confused.

  3. Direct charging to client’s? Yeah right!!! It may be an answer but on the whole, most clients wont pay direct fees. End of story. It is another pathetic example of the total incompetence of the FSA. They keep reitterating that advisers have had years and years to get ready for this and yet here we are just 8 weeks away from lift off and they are still faffing about with the rules. Question: If any given client wont pay a direct fee for advice then what are the chances of those providers who dont facilitate AC being used to place business with? Answer: “Nil-pwa” so advisers will be biased towards those providers who do offer the AC facility. No matter how good an end product is no adviser will recommend it if he/she wont get paid by client or provider. End result? potentially inferior products on sale all over the place and consumer detriment. Even Steive Wonder could see this coming. So much for all the regulator’s total BS about RDR will get rid of Bias. On top of that all their RDR literature for consumers says that they will be able to pay for advice through the product. Guess what Mr FSA? You’re wrong on that too from a growing number of porviders/fund manages and the list will grow. They could not organise a you know what in a brewery and this is the crowd that is supposed to have “world class” people working in it? I would love to know under whose description they are deemed as world class. Its totally disgusting to any decent minded person. I am also amazed at the lack of numbers of previous Pro-RDRites that are posting positive comments on here any more. Maybe even they now see that it is going to be one oalmighty c*ck up. I am sure there will be one person who will stand up for it tho on his comment(s) about this post.

  4. Sadly, with two months to go I will be shutting my business down. The goal posts have moved so many times since RDR started and it’s impossible to create a workable business plan. None of my clients are willing to pay fees upfront and have always been happy with paying trail directly from the funds.
    The FSA have destroyed my livelihood, my family, the ability of low and medium net worth clients to get financial advice and the rest of the industry is slowly going down the pan.
    Well done you bunch of FSAs!

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