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Providers agree high-level adviser charging principles

Five providers have agreed a set of high-level principles they are likely to adopt to facilitate adviser charging under the RDR.

A joint project involving Aegon, Friends Life, Legal & General, Prudential, and Scottish Life has produced a report outlining the common approach to adviser charging the providers will take after December 31, 2012.

It addresses the issue of what happens to adviser charging payments where the client wishes to cancel, and what happens in the event of changes at an adviser firm.

The document has been compiled with input from Sesame Bankhall Group and was organised by Deloitte.

It sets out that any adviser charging agreement, or consultancy charging agreement for group pensions,  will be between the client and the adviser firm, rather than the individual adviser.

The report says adviser firms should make it clear in their charging agreements what happens to adviser charges where a client wishes to cancel.

It says the right to cancel and how adviser charging refunds should be calculated  should be set out in pre-sales literatures such as Key Features documents.

It also recommends in the event of cancellation pension transfer payments should be refunded to the ceding scheme and any adviser or consultancy charges should be reclaimed from the adviser.

Under the agreed principles providers should inform the adviser of all cancellations promptly.

In the event of an adviser firm selling their client database providers may need to check the sale agreement to ensure they can deal with the purchasing firm. Providers can then redirect current instructions to the new firm.

Where an adviser firm loses its regulatory permissions, the document says it is likely  that ongoing services cannot be provided and future adviser charging payments should stop.

If an adviser loses permissions while it is receiving a fee for initial advice spread over time, those payments can continue as they relate to advice previously given.

Deloitte partner Gavin Norwood says: “Although many of the RDR rules and guidance are in place, the industry needs to develop a common view of how adviser charging and consultancy charging will work in practice.

“This shared approach should help to smooth the introduction of adviser charging and consultancy charging across the industry.”

Aegon head of regulatory strategy Steven Cameron says: “We feared there could be chaos in early 2013 if advisers were to agree certain charging structures with clients, only to find the provider they then recommend was not offering that particular option.

“We saw real merit in helping move forward with some common terminology and producing one of the first concrete deliverables to support advisers in their preparations for RDR.”



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