The FCA is not looking to ban adviser charging based on a percentage of assets, says Apfa director general Chris Hannant.
Speaking at a panel debate on trail commission last week, Hannant said charging based on a percentage of assets invested is “fundamental” to the way advisers run their businesses.
He said: “The FCA has been categorically clear that it is not looking at doing away with this. I have it on good authority that this is not happening in the next two to three years.”
Speaking to Money Marketing after the event, Hannant said: “I am pretty confident from my conversations with the regulator this is not an active concern they are about to investigate or come up with proposals for.
“I am not saying that it will be banned after two to three years, I was trying to make it clear to the audience that this is not on the FCA’s agenda at the moment.
“The FCA is conscious of the impact the RDR has had on the advice sector, and of the impact that further changes would have.”
FCA chief executive Martin Wheatley said in July there is “dealing bias” where firms only get paid when products are sold, and cited charging on a percentage of assets invested as an example of his concerns.
The FCA board has previously raised concerns that firms using contingent charging models had an “increased risk of churn given the need to sell products to generate income.”
Hannant says: “The FCA has said it would be concerned if there was bias or a risk of consumer detriment.
“Part of the confusion comes from the fact that regulators do not use categorical language, because they would always have to act if there was a risk of consumer detriment, so they cannot rule anything out.”
A spokesman for the FCA says: “We stated in our post-RDR thematic review that when disclosing fees, cash charging is preferable to percentage charging, simply because it is easier for consumers to understand. This is something we will look at again in our subsequent post-RDR thematic reviews.”
Highclere Financial Services partner Alan Lakey says: “The FCA would be stupid to ban percentage charging because the advice sector has gone through some momentous changes and needs a period of stability to let those changes properly bed in.”
Page Russell director Tim Page says: “There is a fear among advisers the FCA will use the sledge hammer of banning all percentage charging to crack the nut of concerns about dealing bias. So it is very welcome to hear this is not on the FCA’s agenda – it is a big enough step to move from commission to adviser charging, let alone to impose fixed fees only a year or two later.”