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Providers ‘not coping’ with adviser charging demands

100 days into the RDR and big concern over fee methods.

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Keith Richards, George Higginson and Gordon McNeill

Leading distributors have hit out at providers for a lack of consistency in how they facilitate adviser charging, saying poor provider support has made for a “frustrating” start to the RDR.

100 days into the RDR, distributors say providers are struggling to cope with the move to adviser charging, particularly where clients want to pay their advice fees through the product.

Outgoing Tenet group distribution and development director Keith Richards says: “Advisers are becoming increasingly frustrated by adviser charging inconsistencies and the treatment of trail commission by providers and fund managers and have been reporting poor levels of support when calling the various support lines.

“It would seem providers have been far less prepared for the RDR than the advisory profession with feedback that support staff have often been confused about which products can facilitate adviser charging either for initial or ongoing fees.”

In Partnership joint deputy chief executive Gordon McNeill says: “We have experienced an inability to cope with advisers’ fee models and an inconsistency on trail commission from a number of providers.

“Advisers are agreeing a respectable fee, which clients are willing to pay, but getting paid is proving difficult and is taking longer.”

Sesame Bankhall Group chief executive George Higginson says: “The lack of consistency across providers was always going to be a challenge for advisers to get to grips with and this has been borne out by our experience so far this year.”

Almary Green managing director Carl Lamb suggests some providers have used the RDR to rewrite their terms of business to give themselves “a bigger slice of the pie”.

He says: “Cases are happening where the client is still paying the same to the provider, which would have included the adviser’s commission before RDR, without passing anything on to the adviser and then paying the adviser separately for the advice. Treating customers fairly? I do not think so.

“By adopting an aggressive attitude to the RDR’s charging rules, providers are making advice more expensive and could end up pushing some clients away from the advised route down to direct sales, and may ultimately force some IFAs out of the industry.”

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. William Watling 11th April 2013 at 9:25 am

    Since Q3 2012 details of which providers support what type of Adviser Charging for which products / platforms have been added to Synaptic Research & Comparator.

    If we’ve missed anything pls let us know so we can add it.

  2. It is fair to say that every IFA I know has seen their fees to clients increase. The demand for our services as IFAs are there but it is not worth the risk to my business to bring our fees down and support smaller clients as I used to. I would love to be able to ‘pile them and sell them cheap’ but the regulations and risks of complaints & compensations are to great. The recent rise in the FCA & now MAS fees reported and even ongoing questionable actions by FOS and the FSCS are making a bad situation worse.

    What a toxic combination . You really could not make this sort of fiasco up.

  3. It’s time to grow up and realise that adviser charging was just an olive branch from the FSA to IFA’s. It’s a branch that will be snatched back pretty soon and any IFA that is not directly billing their clients is unlikely to have a viable business when support for adviser charging is removed.

  4. Surely adviser charging should be allowed against all products as at present providers are not allowing adviser charging against old-style contracts that they quite prepared to turn off the commission if any alterations done to that contract.

    This will therefore mean that some advisers will recommend clients switching products to an RDR charging ready product as clients don’t want to pay the fees out of their net salary rather preferring instead to have it deducted from product. I am a supporter of the RDR process but I suspect that this could be the next miss selling scandal if regulator does not force providers to allow charges on legacy policies.

  5. All advisers HAD to be ready for RDR of they were unable to trade. The providers and platforms however didnot have to jump through the same hoops!

  6. The whole idea of the ban on commission, and the change to the adviser charging model, was to provide the client with a clear charging structure and an option as to how they pay the charge.

    Providers then restricting adviser charging options are going against the spirit of RDR as they are restricting the choice of the client. Worse still they cancel trail commission but keep charges to the client the same. That is simply theft.

  7. Would you spend millions updating your IT systems for legacy products knowing that the FSA/FCA is likely to change their mind once again?

  8. @Roy Miles… the decision as to whether a provider offers a facilitated advice charge option via their product is a business decision and has nothing to do with being RDR compliant.

  9. I look forward to the Small Claims Court cases that are going to be brought against providers for not providing adviser charging facilities against legacy policies.

    I also look forward to seeing the court cases where providers have switched off commission but pocketed that commission for themselves. Surely this goes against the principle of treating clients fairly.

  10. The problem with RDR is that the powers that be actually thought the public would be happy to write out a cheque each year for advice – when actually a large percentage want it taken out of their investment.

    Unfortunately the FSA pressed on ahead with this expecting everyone to play along.

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