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.