Money Marketing research reveals wide-ranging variations in the way providers and platforms will facilitate adviser charging post-RDR, with major differences around decency limits and dealing with platform cash account shortfalls.
With six weeks to go until RDR implementation, Prudential, Skandia and Just Retirement have confirmed they will impose decency limits on adviser charges.
Skandia introduced commission decency limits in 2007 with a maximum 4.5 per cent initial commission, 1.5 per cent ongoing commission and 3 per cent switch commission. It has confirmed these limits will continue for adviser charging post-RDR. Prudential and Just Retirement have both yet to confirm what their decency limits will be.
Aviva, Zurich and Standard Life say they will not impose decency limits, insisting providers should have no involvement in setting adviser charges.
Aegon says it will not set decency limits, but will monitor charges and will question advisers or refuse to facilitate fees it deems too high.
The FSA does not require providers to impose decency limits but says they have the right to intervene in adviser charging if they believe the charge is excessive. Providers are not allowed to advertise their decency limits in a way which could promote them as a competitive advantage.
In separate research, Money Marketing questioned 11 platforms about how they will facilitate adviser charges when there is a shortfall in a client’s cash account.
Standard Life is the only major platform provider that will not automatically pay advisers from a client’s assets on the platform.
Most platforms typically offer advisers a default “auto-disinvestment” facility, where assets are sold down to meet the adviser charge.
Skandia, Cofunds and Fidelity FundsNetwork will take charges from the client’s largest fund.
Axa Elevate, Ascentric and Transact will sell down assets based on a “last in, first out” basis, while Nucleus, Novia and Aviva will deduct the charge proportionately across the funds held.
Zurich says it will offer auto-disinvestment, but it is not ready to announce the details of its approach.
Facts & Figures Financial Planners managing director Simon Webster says: “It was inevitable that we would get to this stage and have uncertainty over the different provider and platform approaches to adviser charging. Nobody wants to show their hand unless they actually have to, which means advisers were always going to be the last to know.”