Speaking at the PFS Conference, Waters said that if advisers want to offer ongoing services and consumers believe they are worth paying for, they can
include ongoing charges in their price tariffs.
He said: “In those circumstances, and only in those circumstances, will ongoing adviser charges be paid. To be clear our regime will permit, upon
the instruction of the client, arrangements to be made to take such ongoing charges from the product.
“I realise that some firms have concerns about their legacy business, and we will try to keep our approach to this as simple as we can. Any pre-existing trail commission can continue as before; we will not require adviser firms to revisit business conducted before the deadline. On the other hand, if an existing consumer wants a new service that they have not already paid for, the new rules on adviser charging will apply.”
Waters also said he was disappointed that some firms are still complaining
about the FSA’s adviser charging proposals because they believe consumers
will not pay for advice upfront.
He said he was disappointed for two reasons, the first of which was to hear
firms making claims in relation to consumers investing lump sums – saying
that current commission mechanisms should continue because consumers might not be prepared to pay for advice up front.
The second claim he points to is in relation to regular contributions, such
as pensions and Isas that are paid monthly, with it being suggested that
consumers who do not have a lump sum to start with may be cut off from
getting advice under the new proposals.
He said: “As far as these consumer-focused strands of argument are concerned, the common thread I seem to keep returning to today is that it cannot be right to hide the cost of advice from consumers, with the intention that they neither see the cost involved nor value the services they receive. We cannot both support structures that conceal the cost of advice and complain about consumers not being prepared to pay for it. A paradigm shift is needed.”
Waters said allocating greater than a hundred per cent of a customer’s funds is not sustainable.
Waters said: “Initial allocation rates that are greater than a hundred per
cent can create the impression that there are no charges to pay, that any
money being paid to an adviser firm will somehow be offset by this
allocation ‘gift’ from the product provider. I do not see how it can help
consumers to express those charges in such a confused way.”