The retail distribution review states that the FSA will require providers to validate and monitor adviser charges. It says providers must take account of the impact that adviser charges could have on the performance of products and how this will affect outcomes for consumers.
Aviva director of distribution development Stephen Gay says providers should not be responsible for approving adviser charges. He says: “I thought the point of adviser charging was removing providers from the equation. Providers have an obligation under treating customers fairly to ensure they are monitoring distributors but we have to be wary of being placed as a pseudo-regulator over deals being done between IFAs and their clients. There is a danger that bias could be reintroduced where providers have different decency limits on charges.”
Royal London head of corporate affairs Gareth Evans says advisers’ use of platforms will also throw up difficulties for providers trying to monitor charges. He says: “A lot of advisers will be using platform technology and while we will know what charges are coming out of our products, if advisers are separating charges at a portfolio level it will be difficult to monitor. The onus should be on the FSA to do that.”
The FSA says providers will not be expected to act as pseudo-regulators but they will be required to validate charges.
A spokesman says: “Yes, it could be onerous to monitor but it is in their best interest because it is their branding on the products. Providers need to retain some control and maintain a level of checks and balances in the system. There will be no potential for bias because the cost of advice is agreed between the adviser and the client and the provider is only involved as a mechanism of payment.”
Aifa director general Chris Cummings says: “The other side of the argument is that advisers have a responsibility to make sure that providers do not structure their menu payment systems to entice more of one type of business than another.”