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Tim Newman: Platforms are over-complicating adviser charging

Tim Newman MM blog

At one stage I thought the migration to adviser charging might actually be alright on the night.

Having digested the FSA policy statements, I had a pretty clear view of the world to come. It was all pretty easy really.

At the next ‘advice event’ with each client, the adviser would explain his post-RDR menu of services and agree (or reconfirm) the level of service and associated cost.

The client would then instruct accordingly and the adviser would either invoice the client for adviser charges or take their instruction for a product provider to facilitate the payment of adviser charges. Easy.

Moving this practical thinking to the next stage, for a provider-facilitated payment I would presumably just need a written instruction from the client saying “pay my IFA £1,000 please” or “pay my IFA 0.5 per cent a year of my investment value.”

A bit like a letter of authority for a pre-existing plan in the olden days – a simple signed client authority. Nothing complicated there.

So why and how is it all getting so damned complicated?

I have been doing a sweep of the providers lately to see where they are up to on the facilitation of adviser charging. It appears they have not talked much to each other based on the unbelievable range of approaches and requirements being adopted.

Misinformation abounds and confusion reigns.

Let’s start with the (previously) bundled platforms. What exactly do you need to do to convert fund-based trail to ongoing adviser charging?

·Skandia requires a new four-page form to be completed with a wet signature from the client, which must be sent to Skandia before it will activate payments. This is in addition to your own client agreement, which it does not want to see.

·Cofunds also wants a wet signature, but taks a slightly different route. You first need to set up your adviser charging structure online for each client, then print off the ‘fee affirmation form’. This form needs a wet signature from the client before submitting to Cofunds.

·FundsNetwork does not want a form submitted to it at all. It requires its two-page form to be printed off and completed. It requires a client signature, but it does not want to see it, it just wants you to keep it instead. But you do need to go online and confirm that you have it.

So, in addition to the adviser’s client service agreement, complete with client signature, which stipulates the level and nature of ongoing adviser charges, we have a mishmash of provider-specific stuff to wade through. Where exactly has this come from?

Well, for once it is not the FSA. Its requirement is that “the firm facilitating the payment of the adviser charge must be satisfied that the client has agreed to the payment of the adviser charge and how this should be carried out”.

So that will be a copy of the adviser’s client agreement (it being the core contract between the adviser and the client) then? The adviser tells the platform what has been agreed and backs it up with a copy of the signed agreement, yes?

Apparently not. Unfortunately, interpretation by individual providers is creating a library of new adviser charge facilitation documents. Why?

We need a dose of common sense here and a swift outbreak of collaboration. A little more facilitating and a little less dictating would be very welcome indeed.

Tim Newman is managing director of Sense Network


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. The issue is created by rules which are too open to interpretation and this, inevitably, results in a range of different ways of doing it.

    The rule requirement on platforms is to “obtain and validate instructions from a retail client in relation to adviser charges”.

    The key here is to interpret what ‘obtain’ and ‘validate’ mean in practice. I’m sure we all have our view and I’m even more sure we won’t agree…

  2. Oh you are so right.

    For some platforms you need the help of GCHQ.

    Talk about making life complicated!!

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