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Working agreement

The distinction between Cobs and Icobs should be abolished. All business is either investment-related or non-investment related
This difference, in itself, gives clarity and is very easy to understand.

Post-RDR, all investment-related business will be on an adviser-charging basis and non-investment business can continue on a commission business.

Providing the “client agreement” clearly states the above information, the customer should understand the manner in which the adviser will be remunerated.

Imagine, post-RDR, the following text in the client agreement:

If you wish to have advice on investment-related business and non-invest-ment-related business, FSA rules do not allow me to be paid by commission if I advise you on investment-related and non-investment-related business (pure protection) at the same time. I will therefore charge you a fee for non-investment-related business (pure protection) if you wish to discuss non-investment-related business (pure protection) at the same time as investment-related business.

’If you do not wish to pay me a fee for non-investment-related business (pure protection) but preferred that I was paid by commission from the non-investment-related business (pure protection) product provider, I am forbidden from discussing investment-related business and non-investment-related business (pure protection) with you at the same time.

’If you do not wish to pay me a fee for non-investment-related business (pure protection), then I must ask you whether you now wish to discuss investment-related business or non-investment-related business (pure protection) and we will restrict the discussion to that topic.

’We will also need to make an appointment for another meeting after the investment-related business or non-investment-related business (pure protection) advice is completed, depen-ding on which of the two areas (investment-related business or non-investment-related business (pure protection)) you choose to discuss first, is completed.

’There will naturally be a delay in dealing with the second area until the first area is dealt with. The only way for you to avoid this delay is for us to address both areas at the same time, which would be beneficial, as there is likely to be interaction between the two areas. This would, as explained above, involve you paying me a fee for non-investment-related business (pure protection) advice as well as paying me a fee for investment-related business.

’I will not be responsible for any adverse consequences that may arise if you choose to address the areas separ-ately. For example, if you choose to discuss investment-related business first and leave non-investment-related business (pure protection) advice until a later date and if you should (for example) die, suffer a critical illness or be unable to work due to ill-health.

Contrast the above with the alternative client agreement text:

’All business that I do is either investment-related or non-investment related (pure protection). In respect of any investment-related business, I will charge you a fee to be agreed. In respect of any non-investment related (pure protection) business, I may be paid commission by a provider or I will charge you a fee to be agreed.

Name and address supplied

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