Here’s the latest installment of Adviser Digest, with a summary of the interesting articles this week. Click on the title to read the full article(opens new window).
Samuel Dale of MoneyMarketing reports on Government response to John Kay Review published in July. According to Dale, The business secretary Vince Cable has set out the Government plan to define fiduciary duties for all investment intermediaries including advisers, brokers and trustees.
Cable said “We are making it clear that all intermediaries should act in good faith in the long-term interests of clients or beneficiaries”
This proposal has several ramifications for IFAs and Financial Planner, although some might argue that advisers are already acting in their clients’ best interest. There are several questions yet to be answered though, including how this will affect tied and/or restricted advisers.
This piece in NMA reports that the FSA plans to scrutinise what tax wrappers or account advisers take their fees from (well, not that anyone expected them to do otherwise surely). The suggestion is that if you take advisers fee from ISAs for instance, this effectively detriment the client.
An unmanned FSA spokeswoman is quoted as saying ‘every adviser has to consider all of the costs involved and all the repercussions for the client, and tax is obviously one of those. ‘If a client is disadvantaged because of the arrangement the payment is facilitated by, [advisers] need to take that into account’
If you add to this the HMRC’s stance that taking fees for non-pension related advice could effectively result in unauthorised payment (and the corresponding penalties), the problem with talking adviser charging from investment bond and the ongoing lack of clarity around VAT, then what you get is a big conundrum; where the hell should adviser charging come from?
Well, I don’t know the answer to that but it is pretty clear is that the regulator is hell-bent on cutting the provider-adviser umbilical cord.
This article in MoneyMarketting looks at how providers are applying ‘Decency Limits.’ These are caps imposed by providers to limit the maximum amount they are willing to pay under adviser charging. Prudential, Skandia and Just Retirement are among those who have confirmed they will impose decency limits on adviser charges.Is this another sign of providers flexing their muscles in every possible way they can?
This isn’t really a regulatory requirement placed on providers. The FSA muted the idea in consultation paper in 2009 that providers would be expected keep an eye on the amounts they were being asked to pay and report excessive payments to the FSA. It has since retracted on this, saying ‘the FSA is not a price regulator so we haven’t set any cap or said the provider can’t pay above a certain level.’
One wonders why providers feel the need to place a cap on how adviser charging. Surely that is a matter better advisers and their client? Provider claim they are trying to protect clients from being ripped off by advisers and prevent damage to their own brands, but the risk here is that providers could be seen as interfering with advisers remuneration, which clearly go against RDR.
This article by Campbell Macpherson in Fundweb noted that 2013 will be the year of reckoning for platforms, adviser technology providers, networks and DA service firms. Service providers will come under scrutiny as advisers look to forge the right partnerships that will help them to thrive in a post-RDR world.
Macpherson highlighted 10 important questions advisers need to ask about their network. . The first five questions are all based around the fundamental and critical conundrum, “Is your network likely to survive RDR?”, because let’s face it, if your answer isn’t a resounding yes to this, there is no point proceeding on to questions 6-10.
- How well has it managed its liabilities in the past?
- Is the network profitable?
- Is its business model sustainable?
- Does it have the capital reserves necessary to satisfy FSA’s “plausible but nasty” scenario within their Threshold Condition 4?
- Are its shareholders genuinely willing to stand behind the business if it gets into trouble?
- How are the network’s directors remunerated?
- When it comes to PI insurance, are you costing me money or saving me money?
- Why shouldn’t I become directly authorised?
- What happens to my trail commission if I leave?
- How can you help my business become outrageously successful?
The independent research firm Rayner Spencer Mills has launched its 2012 edition of “A Guide to Adviser Platforms.”
The 20 page guide places emphasis on platform usage and selection in the shifting regulatory climate and makes a useful resource for anyone carrying out due diligence on platforms. It includes details of ownership, financial strength, technology infrastructure, tax wrappers and tools available on 13 platform providers.
Of particular interest is the individual factsheets for each of the 13 platforms, which included operator’s financial strength and ratings through the analysis completed by AKG. Full report on the financial strength of platform providers are also available from AKG at www.akg.co.uk
The RSM Platform Guide is free to download here (registration is required.)
I hope you have enjoyed this and hopefully it’ll make you job a little easier! As paraplanners, that’s what we do! As usual, thought and comments are welcome. Enjoy your weekend!