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Adviser charging debate rages on in the new world
by Tim Cooper on Feb 21, 2013 at 15:13
Advisers like David Batchelor (pictured) who ask clients to write a cheque may still be in a minority even in the RDR world, and opinion on the best charging method is as divided as ever.
In the retail distribution review (RDR) world, the majority of advisers have moved to adviser charging facilitation (ACF) through a platform or product. However, alternative fee models remain, with direct payments for a project, percentage of assets and hourly charges being used.
Some question whether ACF is sufficiently different from commission and whether the incoming regulator, the Financial Conduct Authority (FCA), would eventually scrap it in favour of direct fees.
David Batchelor, director of Aylesbury-based Wills & Trusts Chartered Financial Planners, is concerned the commission ban is not working. ‘The RDR is all about charging fees rather than taking commission. So why is it that, speaking to advisers, less than 25% actually take a cheque from clients?’ he says.
‘Most take fees as either a deduction from the investment or pension, or from a trail fee. But if you ask clients to pay a cheque for that amount, many would not do it.’
Batchelor says either there will be no change – fees will continue to be taken from investments and clients will still ‘not really understand what they are paying’ – or the new regulator will start looking into trail mis-selling.
‘If they want to do the job properly, they will insist that all clients pay directly. I doubt that would happen, but it would make the client think about what they are paying and the value they get. If cheques had to be written, it would drive down fees dramatically,’ he says.
Martin Bamford (pictured above), managing director at Surrey-based Informed Choice, says he gives clients a choice of ACF or direct payment.
‘We remain flexible in terms of how clients settle fees, either through ACF or by invoice,’ he says. ‘Invoices are becoming increasingly more efficient, rather than using providers as the payment mechanism.’
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