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FSA to scrutinise adviser charges from clients’ tax wrappers

by Jun Merrett on Nov 23, 2012 at 11:30

FSA to scrutinise adviser charges from clients’ tax wrappers

Advisers who take their charges from a client’s tax wrapper will come under scrutiny from the Financial Services Authority (FSA) in 2013.

The regulator will look at which wrappers or accounts advisers take their fees from as part of its thematic review into adviser charging and supervisory work next year.

A source close to the situation told New Model Adviser® the FSA was preparing to raise the issue when it visited adviser firms. They said the regulator was concerned clients could lose tax advantages.

‘If you have money sitting in an ISA, the FSA will ask advisers why they are taking charges out of the wrapper, and say that’s bad advice,’ they added.

An FSA spokeswoman said: ‘Every adviser has to consider all of the costs involved and all of 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.’

James Norton (pictured), director of Evolve Financial Planning, said it was not a problem if an IFA took a fee from a tax wrapper, provided the client had been given a choice.

‘Clients should be able to pay advisers however they want as long as [the adviser] is not being unduly benefited from where they are getting the fees,’ he said.

Click here for our definitive database on wraps.

81 comments so far. Why not have your say?

Charles Rickards

Nov 21, 2012 at 15:06

What next? Perhaps the regulator should have made a total ban on any payments from product providers to advisers, leaving the client with the full responsibility for paying for advice and ongoing servicing from there non investment funds. This should be well recieved by those who have spent years advising clients to build up sizeable ISA portfolios and the like.

Whilst on the matter of commissions, how can it be right for non advised sales to still pay commission? Or have I got this completely wrong?

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Tim Page

Nov 21, 2012 at 15:40

@ Charles Rickards:

"How can it be right for non advised sales to still pay commission? Or have I got this completely wrong?"

The reason we have this situation is that the RDR rules apply to personal recommedations on Retail Investment Products. E/O by definition does not involve a personal recommendation.

Whether it is "right" as in "fair" is another matter...

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Richard Hardy

Nov 21, 2012 at 16:27

Should have kept commission then it wouldn't be a problem!!

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Charles Rickards

Nov 21, 2012 at 16:59

@ Tim. Agreed, but how will the regulator police the unscrupulous, who will advise and then direct the client to a non advised purchase route?

In my opinion, the full consequences of RDR have not been considered and I feel there is a real danger that the general shift will be detrimental for consumers. I note that one of the major product providers RDR charging structure has not reduce by the amount that would previously have been paid out as commission. RDR producesthe most positive benefits for the Regulator and product providers.

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David Curley Dip extrodinaire

Nov 21, 2012 at 18:16

So if a client has only their ISA monies on Wrap, does that mean the adviser cannot be paid via adviser charge ?

Who is feeding the FSA these ideas ? that the client is disadvantaged if charges are from ISA, I am thinking vested interests are stirring the pot !

What about all the directly bought ISA's ? next year how is the provider going to be paid and cover his marketing costs ? I do not know, but its going to come from Investment monies so whats the difference ?

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Julian Stevens

Nov 21, 2012 at 19:42

I'd thought the FSA was going to become extinct at the end of this year. Why don't they just fudge off and die?

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Andrew Carter

Nov 22, 2012 at 00:47

"A source close to the situation told New Model Adviser® the FSA was preparing to raise the issue when it visited adviser firms. They said the regulator was concerned clients could lose tax advantages."

A source close to the situation should really be made to explain why they think it is better to have adviser charges paid out of net investment returns rather than gross returns! A basic rate paying client would need to generate 25% more income to pay their charges out of net returns. Does the source close to the situation work for HMRC?

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Sam Matthews

Nov 23, 2012 at 11:57

So if you extend this logic - if you advise on a pension and DONT take the AC out of the pension product/wrapper then this is also bad advice as it is much more tax efficient to use money that has had tax relief. So therefore every provider that isnt facilitating AC though its pension products (and there are many that arent) will see this busines die instantly - no new business or increments coming in and massive churn on any exisitng business to products that do faciltate. Genuis.

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Keith Cobby

Nov 23, 2012 at 12:03

Surely what the FSA are trying to do is break the link between advice and sales.

The professional financial adviser should expect to be paid directly by the client and not by a product provider through commission/adviser charging.

RDR is the second act ('Polarisation' being the first), act three will be along in due course!

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James Wetherall

Nov 23, 2012 at 12:04

ISAs are the easy part.

What about the interaction with Investment Bonds and Collectives in terms of ongoing adviser charges and taxation?

And has anyone actually begun to consider the implications on trust based investments like DGTs of ongoing adviser remuneration in the 'New World'?

The law of unintended consequences plays out as usual and there is a worrying amount of ambiguity still remaining.

I would think for 99% of clients, if given the option to write a cheque for our ongoing adviser fee, or have it taken as a small regular increment from their investment, it is obvious what they would prefer.

Unfortunately the new rules have now made it incredibly complex to do so and to my mind counter productive.

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Ken the Beckett

Nov 23, 2012 at 12:05

Dear Mr FSA ...keep biting the hand that feeds you and pays for your final salary pension scheme and eventaully you'll be out of work too.

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Arthur Schopenhauer

Nov 23, 2012 at 12:06

Actually if you has sat in cash (as we advised ) during some of 2008 then cash was the right asset class (subject to the bank counterpart y risk) so it is just rubbish to suggest that being in cash should suspend fees

Where do providers take charges from?? are they to offer clean contracts and bill the client separately

..

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Richard Woodwards

Nov 23, 2012 at 12:09

@ Andrew, spot on. The "source" is probably George Osborne trying to rake a few more quid into the coffers of HMRC by making clients pay for it after tax and NI has been deducted from their salary.

God forbid a tax payer could be better off!

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Chris Moseley

Nov 23, 2012 at 12:12

laughable

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Des Pondent

Nov 23, 2012 at 12:13

Brilliant - you couldn't make it up!!! So does that mean I may have disadvantaged my clients by taking commission from tax wrappers in the past? Cheque books at the ready - again?

I spend more time these days faffing around with all the peripheral crap than getting on with the job in hand. Bored now!!!

@charles rickards - "What next? Perhaps the regulator should have made a total ban on any payments from product providers to advisers" - I don't think you'll have too long to wait for that one. RDR 2 within two years.

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Derek Dryden

Nov 23, 2012 at 12:16

"a source close to the situation " ??? very ominous ! ! !

Typical FSA, they are going to scruninise the details of work advisers do, just as they head out of the door and are replaced by the FCA.....can the new boys try to regulate this industry in a more proactive way pls, rather than a never ending series of REACTIVE measures

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John Burchett

Nov 23, 2012 at 12:20

Perhaps we should offer free advice and get an EU subsidy instead.

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You must be joking

Nov 23, 2012 at 12:22

As always there are two sides to any arguement and the "source" in this one appears to be ignoring the alternatives.

As a couple of people have already stated, whilst taking money from an ISA, or pension for that matter, means there is less in the tax efficient environment, it also means that fees are being paid from monies which have received virtually gross returns (exception being the dividend tax credit).

Unfortunately, Utopia doesn't exist and you can't have it both ways!

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Direct Adviser

Nov 23, 2012 at 12:24

Well they should have thought of this before they changed the rules.

Look waht happened with stakeholder, no adviser payments = No pensions advised...No adviser payments = No ongoing advice - result.......End of the mass market adviser industry reserved for the high net work only who are prepared to pay fees as it is clearly cheaper for them with the size of funds under management.

Why not go attack estate agents for a change, they charge a percentage of house sales and all they do is advertise and how people around.

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Sean Condon

Nov 23, 2012 at 12:25

I am beginning to think that Citywire's style of journalism is not helpful at all! Another day, another FSA story that's not a real story. The fact that the FSA will follow up the new rules when conducting visits to advisers to see how they are being implemented so as not to disadvantage clients is NOT a story. It is actually what the FSA do.

What would be a story is if the FSA said, 'well, we've introduced these new rules but when we see firms next year we won't look at the detail or discuss them with advisers. We'll probably just talk about the weather with them!'.

Come on Citywire - stop writing vague non-sensical pieces that only encourage an outpouring of misunderstandings and ever increasing paranoia from the bloggers...unless that is exactly what you want, in which case, carry on...you appear to have found a willing and captivated audiance.

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Phillip H

Nov 23, 2012 at 12:27

It's idiotic. OK Mr Client my charge for the review is £500. You can't take this from your ISA as this is tax inefficient. OK Mr Adviser, I don't have the funds available as the funds I have in cash are emergency funds, can you please arrange for £500 to come out of my ISA please so I can pay the fee in cash. Oh and by the way in the future I will put £500 less into an ISA each year in order to pay your fee. Erm, net effect... but with a lot more hassle...

And pensions, don't even get me started...

I think the source close to the situation was a little too embarsssed to be named

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Darren Broomfield

Nov 23, 2012 at 12:31

FSA making hard of light work again (my clients are totally fed up with rule change after rule change after rule change...or should I say rule "shift" !

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Philby via mobile

Nov 23, 2012 at 12:33

I am sorry to put the cat amongst the pigeons but I actually agree with the FSA on this point in some circumstances.

If we advise our clients to maximise pension and ISA contributions each year to build up these assets it seems perverse to then ask the client to automatically pay our fee from these account which reduces their value.

Of course it should be the clients choice but the key issue here is providing the choice. I have many clients who prefer to pay our fees by a separate arrangement rather than take from tax advantaged funds. They quite rightly view it as extending the amount they can pay in to ISA/Pensions and therefore increasing the amount invested

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Arthur Schopenhauer

Nov 23, 2012 at 12:36

In the case of a SIPP the money is owned by the trustee so clearly the advice should be paid for by the trustee. I have a number of SIPPS which are VAT registered so as to deal with rents no doubt the VAT can be recovered

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I'm an IFA - get me out of here

Nov 23, 2012 at 12:39

One of my best clients called today to query the paperwork he has received from Cofunds about RDR and its new charges. He did say how he had employed me to work on his behalf and didnt want all the paperwork that is coming through from different people. He has not got time to plough through it all.

When I explained the changes (we had already written to clients to explain this) he suggested it was a shame they didn't leave things as they were as he had been very happy with the way we had worked in the past.

He is not the first client to have said that, and I doubt he will be the last.

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Tony Laverick via mobile

Nov 23, 2012 at 12:43

So, an IFA takes the ongoing fees for arranging ISAs out of the UT portfolio with net charges. Does that qualify as intermediation or will 20% VAT apply. Client has already been disadvantaged through paying higher rate tax on the increased income as the annual charges are no longer deducted as expenses.

Maybe we should encourage clients to complain to regulators that their actions have been detrimental.

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Julian Stevens

Nov 23, 2012 at 12:46

The Skandia platform, for one, has for many years facilitated payment of all charges (theirs and ours) on top of the full ISA input allowance. Is there any reason why this shouldn't continue?

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Chris F

Nov 23, 2012 at 12:46

A client has a unit trust, bond and ISA portfolio.

They are higher rate tax payers and often use their full CGT allowance.

They are taking 5% withdrawals from the bond.

If we take our fees from the unit trust it could trigger a CGT charge. If we take it from the bond, it would trigger a chargeable event.

Both of these would incur cost as the calculations and extra tax work take time to process.

As taking the ongoing fee from the ISA would be the most cost efficient for the client, what precisely are we to do?

The FSA has its fair share of incompetent, over paid fools who do not understand even the most basic principals of financial planning - so whatever we do will be over their heads.

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Phillip H

Nov 23, 2012 at 12:46

Philby. I agree that it far simpler and cleaner to have a fee paid direct but...

"So Mr 50% tax paying client you can pay my fee out of taxed income. This will cost you £1,000. Or you can make a pension contribution and my fee will cost you £500"

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Philip Wise

Nov 23, 2012 at 12:53

We all know that when journalists use an unnamed source, they are just making it up. There's no chance that the FSA would have said that.

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Bob Donaldson

Nov 23, 2012 at 12:59

They won't be happy until the client pays us all by a cheque out of their bank account regardless of how tax efficient it might be in any other way.

I am finally convinced that they don't like us earning anything. I am thinking of registering as a charity!

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Philby via mobile

Nov 23, 2012 at 13:01

Philip H : I agree hence why I said in some cases. If Mr 50% tax payer is looking to maximise contributions and wants to pay £50k in to his pot it seems a little odd to then automatically take my management fee from that pot when the client is clearly looking to increase its value. Clients choice of course. Simply if you take fees from the pension the client will have less in his pension pot.

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Alan Mellor

Nov 23, 2012 at 13:05

This is also such a big issue when Adviser charging hits Annuities! The big boys will find a way around any commission ban

See here http://bit.ly/10ikxjB

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Phillip H

Nov 23, 2012 at 13:11

Philby, yes you are right of course. But the alternative is he will have even less in readily available cash so if I was advising that client I would say the ads of maximising your net wealth outside your pension outweigh the finaicial advantages of maximising your pension.

Anyway we are probably agreeing with each other in an odd way and I am being overly pedantic. Point is it is not an exact science and the FSA would be mad to try and make it an exact science

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Arthur Schopenhauer

Nov 23, 2012 at 13:23

@Philby

So your £1000 fee should come out of this after tax pay?

Gross Pay £111,000.00 £110,000.00

Tax Free Allowances £2,605.00 £3,105.00

Total Taxable £108,395.00 £106,895.00

Tax Due £36,484.00 £35,884.00

National Insurance £5,557.36 £5,537.36

Total Deductions £42,041.36 £41,421.36

Net Earnings £68,958.64 £68,578.64

Employers NI £14,284.66 £14,146.66

Even drawing that £1000 as extra income costs £518 without considering the VAT of course he should pay it from the pension

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Mad Eyes

Nov 23, 2012 at 13:30

More hurdles and complexity and therefore cost i think. Who pays? The same person who always has and always will, the client. Operating costs WILL go up and the clients will have to pay more.

OF COURSE we advise clients to put their money in the most tax efficient place and take charges/fees out of the least tax efficient place.

BUT its not always about tax efficiency.

TCF

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philby via mobile

Nov 23, 2012 at 13:37

Arthur: He has already paid the tax and received his net pay! Paying it out of the gross fund does not reduce his tax bill!

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Arthur Schopenhauer

Nov 23, 2012 at 13:40

@ mad Eyes

Yes it is at the beginning all about tax

If you had £1M profit you could pay

48.85% Total Tax (DIVIDEND)

55.92% Total Tax (FULL DIRECTORS SALARY)

50.06% Total Tax (SOLE TRADER)

So basically the miserable amount you get into a pension does have a head start on after tax savings alternatives. Even if you get screwed at a later date by HMRC

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Alan Powell

Nov 23, 2012 at 13:47

Try working in Cornwall

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Alan Smith

Nov 23, 2012 at 13:47

@ Arthur

HMRC have already announced that they will be scrutinising adviser fees taken from Pension Plans and said the level of fee must be proportionate to the overall assets fees are is respect of.

So if someone has £200,000 in pension, £200,000 ISA and £200,000 OEIC and overall adviser fee was £4,500 per annum if more than £1,500 was taken from pension HMRC could challenge client and could potentially class it as an unauthorised payment and remove tax exempt status of pension with corresponding tax penalties. No client would thank you for an HMRC inspection of their affairs.

You may get away with slightly more than £1,500 of the £4,500 coming from the pension as invariably the pension requires more administration especially if client is in income drawdown, but still a risk.

Obviously FSA did not consult with HMRC when introducing RDR which is al to obvious in the ongoing VATable or non-VATable debate on fees.

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Arthur Schopenhauer

Nov 23, 2012 at 13:49

@Philby I know that but paying out of a gross fund that he has had tax relief on and where you can reclaim the VAT is better and even better if he took salary sacrifice and saved the Ni for himself and the company

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Arthur Schopenhauer

Nov 23, 2012 at 13:49

@Alan

Where is Cornwall?? Is it on the Central Line?

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A Childs View

Nov 23, 2012 at 13:55

All the article is saying is that AC from inside / outside the wrapper needs to be considered when advising - isn't this obvious and something all advisers will do anyway on a case by case basis? For some faciliation from inside would be bad (lump sum ISAs) but others good (regular premium ISA with 5 year spread period). 99% of pension facilitated AC should come from within the wrapper due to tax relief. Bonds might depend on capital growth v income objectives. There can be no hard and fast rule on this one. More importantly, can women be bishops Mums?

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Phillip H

Nov 23, 2012 at 13:56

@ Alan Smith

Hold on a minute so HMRC are effectively saying it has to be proportionate (which makes sense quite frankly) and the FSA are saying it has to be tax efficient (without understanding what this actually means)! God help us - more contradictions

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Martinifa

Nov 23, 2012 at 14:02

This clear demonstrates yet again the regulators total lack of regard, forethought and most of all consequences of their statements and actions.

We are less than a month away from the implantation of RDR, most of us have been working very hard towards this goal for many years based on their guidelines. Yet, even now, they seem to be unable to comprehend what their actions will have and the consequences. To change the rules yet again having stated that fees could be taken from investments for the last three years. They have now idea of the work involved and costs incurred when they come out with yet another action or requirement.

Does this mean they should pay all the investment charges, fund managers and every other charge directly and not from the investment.

If I have to chase, collect, pay bank charges on each entry, write to clients, renew every year for these fees, then the cost goes up. I think you will find yet again only the rich will benefit, Mr & Mrs average will pay more or will not be able to afford the service.

What will happen at this rate is there will be NO advisers to regulate or the cost will be so high only a millionaire will be able to afford advice. The regulator would sell this to Government, TSC and media as meeting their requirement to stop poor advice and that they had done a good job. They would then give themselves a bonus.

They have no idea of the cost of running a business, maybe it should be a requirement for all regulatory staff to have done so as well as qualifications.

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Frederick

Nov 23, 2012 at 14:03

Have I missed something here. Surley it is better for the client, oh by the way, the client that has agreed to pay by adviser charging, to pay from a gross investment rather than a net investment as it would mean that they would need the net investment to grow around 25% more to cover the costs.

tell me if I am wrong???????

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Julian Stevens

Nov 23, 2012 at 14:11

To Alan Smith ~ the FSA didn't consult anybody about the RDR, other than a small coterie of people who it knew would go along with its thinking on the subject. Or, if it did, it kept carefully locked away from prying eyes all dissenting responses, as it always does.

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Phil Castle

Nov 23, 2012 at 14:17

If your terms say you charge x for advice on their pension, x for advice on there ISA and then X on whatever else. If the client then negotiates down a discount based on the amount of work done, does the discount have to be proportionate or can the adviser choose where he applies the dicount to?

As Phil H says, we now have a conundrum/contradiction.

My Client agreements have always quoted our maximum charges, with no discounts specified for size of funds involved, but I have always been willing to consider and give when asked for them.

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Alan Powell

Nov 23, 2012 at 14:37

ha ha very good Arthur. The point is many clients in Cornwall want advice but will not be able to afford £1,500 or £2,000 what ever it will work out at as I am sure there are many in other parts of the UK. When I worked in the City then a totally different story. Being practicle Segmentation is forcing me to take a hard look at my business going forwards and sadly maybe dropping groups of clients that traditionally I have more than happily looked after and have great relationships with. What the hell is going on

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Alan Powell

Nov 23, 2012 at 14:37

spelling sorry

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Sam Matthews

Nov 23, 2012 at 14:45

Phil castle - you can only take AC from a pension to pay for advice on that pension scheme so if you are discounting your overall charge but only apply the whole discount to, say, the ISA, then you are in effect taking non pension advice charges from the pension which will get you in hot water with HMRC

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Man of Kent

Nov 23, 2012 at 14:55

@ Chris F - "If we take our fees from the unit trust it could trigger a CGT charge".

Blimey, Chris, how much do you charge?

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Phil Castle

Nov 23, 2012 at 14:56

@ Sam - I hear what you are saying, but

1. I am only taking from the pension what is my standard for advice on that pension as stated in my client agreement

2. I am not taking anything extra from the pension.

3. I am taking less from the ISA than I have intended and agreed for the advice on that ISA.

This is could be yet another unintended consequence of the change from commission to adviser charging.

Simple answer will be no dicounts at all for volume business.

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I'm an IFA - get me out of here

Nov 23, 2012 at 15:09

@Julian

When FSA originally consulted on RDR it claimed the aim was to encourage savings. The protracted consultation process has resulted in a very different outcome and one that you would not recognise from the original proposals.

I for one am very disappointed and disillusioned by the final legisaltion as it has come at a huge cost in time, effort and money, and yet I do not believe my clients wanted change and certainly will not benefit from it, quite the opposite we will be charging more to cover the cost for the additional time we will now be taking to process and administer adviser charging etc.

We have a lot of business on the Cofunds platform and I dread the day I have to recommend a switch. Either I will be out of pocket or the client will be.

Very sorry state of affairs.

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Chris F

Nov 23, 2012 at 15:16

@ Man of Kent

The point is, even £10 would incur a CGT charge if they have already used their allowance. If they haven't we surely have to document that our charge will not be incurring a charge as we are providing advice on the portfolio in the first place.

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Julian Stevens

Nov 23, 2012 at 15:21

To Phil Castle ~ From what you say, unless you're providing your advice at a loss, some nasty little nitpicking jobsworth at the FSA/FCA, sat on his/her loathsome spotty behind looking for something with which to find fault, will intepret this as cross-subsidy.

To I'm an IFA, get me out of here ~ I have to say broadly agree with the principles of the RDR (adviser charging and a not hugely higher higher qualifications threshold). But where the FSA has fudged up big time are on the communications and implementation fronts, not to mention the whole criminally phoney Cost:Benefits Analysis on the basis of which this now unstoppable juggernaut was launched and, of course, all its typically sham consultations along the way.

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MPT

Nov 23, 2012 at 15:23

Simple annual fee, let’s say £1000 for ongoing service in conjunction with intermediation across your portfolio. If pay direct cheque = £1000.

If you want i can ask all product providers of yours if this can be deducted equally across all holdings (Sorry need to charge you an additional fixed £200 for administration of multiple payments to cover reconciliation as will need to document these all on my next Gabriel return). Thus that will be a £1200 product deduction.

My regulator/compliance will need you to sign a declaration as well stating that you have sort no advice on specific tax wrapper deductions, in addition you will you will not be tarred with the old brush of tax avoidance.

Alternative Mr/Mrs Client , I can do an individual assessment of tax planning to remove £1000 from the most efficient tax wrapper taking into account all future possible positives and negatives I can see today by this.

You will need to sign a disclaimer for my compliance/ regulator that I cannot be responsible for any future changes the government may make that could have impacted on the choices recommended to you in settling my fees. I estimate that in carrying out this piece of work for you it will be about 3-4 hours work minimum, this includes the report writing for you outlining all positives and negatives considerations etc.

Unfortunately the bill for this will be an additional £1000 plus a further 20% Vat as this is clearly not intermediation to do with a new sale.

I will discount a future liability charge on this advice as I hope the disclaimer will not be challenged in the future. ( FOS will find against me anyhow on some issue perhaps that I have not shown you the potential savings you could have made by getting to the right outcome after the event if had not paid to be advised and instead had managed to drew straws on which product to pay charges from and actually got the right sequence)

Now we can deduct a total of £2400 from these three wrappers but not deduct anything from your other two. VAT man benefits £200. Client loss £1200. Paper mountain gain =50 sheets.

The good news is that we did not touch your ISA account, however if you get some future stigma attaching accusation that you planned to avoid tax in any way shape or form can you sign in blood to indemnify me from association from any claim at any point in the future, for personal reputational damage you may suffer, for artificially manipulating using perfectly legal tax allowances.

Allowances are only really designed for the non advised government direction of where you may put your money and MP expense claims, not mere clients and members of the public at large.

What do you mean you want to cancel my new terms of business with immediate effect? I am only getting ahead of RDR requirements.

You are only pretending not to want to pay for advice. Following my review I was also going to tell you it would be sensible to increase your long term savings by £1200 a year extra into your pension. It says so on my cash flow model tool.

Ha Ha, I have an idea, what if we done this using the factors of salary sacrifice and your new matching employer contributions. 4+ 1+3. RABBIT/HAT moment. Oh No we can’t do that. That would breach consultancy charging and I did not set up the company scheme. Perhaps we should do a transfer from your new nest account to settle your fees. Oh no can’t do that. I will need to have another think for you, Red Tape etc.

Unfortunately I will need to charge you for a rethink of ideas on putting the extra away. Oh crumbs sorry forgot to mention will have send you a small separate bill as our cash flow modelling program cannot cope with your complex requirements. Sorry that will be subject to VAT.

My future regulator the FCA will fine me if I do need to show you in pictures over a lifetime how much better off you would be if you did not pay for professional advice and went to the Money Advice Service instead.

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Phil Castle

Nov 23, 2012 at 15:33

@MPT that's exactly how I feel now.

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You must be joking

Nov 23, 2012 at 15:33

@ MPT

Tres bon... made me laugh!

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Knowledgable insider

Nov 23, 2012 at 15:50

Blame the Government for all of this as it is they who have handed the FSA unlimited scope to do with what they wish. The FSA will carry on regardess of what is said on this platform as they are impervious to critisicm. If the polticians had an incling that all of this will have adverse affects on employment and the ability for the average/poorer investor to obtain advice AND that this might affect them at the polling stations THEN you might see some reaction. Until then it will be more of the same as, believe me all of this is no more than an idiolgical experiment on the part of the FSA who actually have no idea how the public will react to all this. Thos of us who have dealt with investors for decades know exactly how this will all pan out.

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MPT

Nov 23, 2012 at 15:57

Compliance follow up following fiffty lashes.

I know i said in our last meeting the said i said MAS was free. Well sort of. Did not mean to mislead you in any way.

I know I said it was free, well its is in a smoke and mirrors sort of way really it is funded by a levy on my business and the industry at large. In turn we charge you so you pay for it in the end.

The good news is that they have appointed a new chief executive who will only earn £140,000 p.a. compared to her predecessor whose overall pay was reported to be £350,000. Not bad for a quango, I know.

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Keith Cobby

Nov 23, 2012 at 15:57

If you employ a solicitor or accountant they will invoice you with their fee which you will pay by cheque or monthly direct debit.

If you buy a car or holiday the salesman's commission will be included in the product's cost.

The FSA are saying you can be a professional financial adviser or a financial salesman - the choice is yours. It really isn't very complicated.

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Mr Man

Nov 23, 2012 at 16:01

Become non regulated. Final salary scheme transfers to a QROP ( even if UK resident), take commission on the transfer to the QROP and more commission by investing in multiple non reg funds.....UCIS's for example. The reg market in the UK is dead. Long live commsiion deals!

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Philip Wise

Nov 23, 2012 at 16:12

Today's NMA lesson.

Facts are dull. Nobody's commenting on the other fact based stories today.

Make something up about the FSA whilst the kettle's boiling in the morning and you'll get 63 comments.

I will buy a hat and eat it if it turns out someone from the FSA really did say anything like this at all.

Fiction is the new fact.

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lee rawding

Nov 23, 2012 at 16:20

Eleventy twelve.

Number of angels that can dance on a pinhead that is or have I missed the point? ;-)

NMA rings the bell and we all start slavering (again).

Well this Pavlov's pooch is about to finish his week and clear off home for a weekend of fun and frolics I suggest you all do the same and leave this lot to think up the next week's 'bell ring' headlines.

Have a good one all!

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Martinifa

Nov 23, 2012 at 16:24

Philip Wise, you live up to your name sir.

My blood pressure has fallen slighty.

Been doing some digging, it would be interesting to know who the source was.

Have asked a friend to investigate further. I will what and see.

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Half Baked

Nov 23, 2012 at 16:27

@Phillip Wise

It's the same every friday afternoon. I think NMA must know that Financial Advisers are bored post 2pm, so write an inflammatory story, just to help everyone fill the void between lunch and the weekend warm up pint.

Cheers.

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Martinifa

Nov 23, 2012 at 16:42

@MPT thank you, your a star, blood pressure down and actually laughing.

So true, if only the consumer understood.

Going for a pint to further reduce feeling and blood pressure.

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Philip Wise

Nov 23, 2012 at 16:47

I'm off for a pint of FSA - F**ing Strong Ale

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Philip Melville

Nov 23, 2012 at 17:19

I did hear from a well connected source that SJP were being hired to police so called IFA adviser charges to ensure that they are not too low !!!

And I am not sure if I heard it correclty that Andrew Fisher is to adjudicate on any disputed cases to determine whether they resemble commission !

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David Hatton

Nov 24, 2012 at 01:16

And the hits keep on coming!!!

I feel the regulator is expecting all investors to pay by chq or cash up front, based on my experiances with clients they are dreaming! People don't want to pay & won't pay upfront or monthly for advice so watch this space. If this comes about more financial advice exclusion for the low earners.

All it's going to do is drive individuals to cash deposits ( at best) and at the mercy of inflation risk, or alternatively they just won't bother to save . Now that probably helps the FSA through reduced admin & monitoring but what a load of gaps we'll all have!

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Mark Stokes

Nov 24, 2012 at 06:12

Just had an very early client meeting and my new client gave me a cheque for £11,280 for this years ISA. I then took a cheque for my fee which in view of the travelling time of in excess of a an hour was circa £400 more than the commission would have been in the bad old days.

In view of this latest report which I have to say sounds a little 'made up' . I thought why stop at maximising tax advantages by not taking my fee from the wrapper.and of course she had no problem writing a cheque for the 20bps to the wrap provider and another cheque for the 39 bps to the fund manager. I said I would be back next year to collect the cheques for my 100ps and the seperate cheques for the wrap and fund manager.

I explained that when the banks scrap cheques we would trust her to log on and pay all of us using speedy payments but as she was not really comfortable with Internet banking we could remind her each year puoand talk her through the process but would of course raise a modest charge for our time. No problem!

As I left she was dancing with delight tha the FSA/LUA (lunatics at the asylum) had ensured the hugely valuable tax benefits of her ISA had been protected from our fees being paid from the wrap. I will of course be writing advising that she asks her bank what her banking will be costing in this brave new world!

Oh and the TER on the above, must be approaching 4% but at least the 1% she captures in growth is tax free!!!!!

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Sam Matthews

Nov 24, 2012 at 09:20

It was always the FSA's intention for clients to pay for advice directly - they just gave in to pressure to allow product facilitation.

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Gillian Cardy

Nov 24, 2012 at 09:50

The "source" should not be secret - Citywire, being proper journalists, will never share the secret so the person concerned should make themselves known and make clear why they say what they say.

At one level this is nothing new - good advisers have always considered the optimal way to be paid for their services : why it's better to take commission / adviser charges from annuities than take a fee and do the annuity on nil commission - why it's better to take fees from pension funds than direct.

But let's not bring VAT into it. Where the money actually comes from to settle your bill does not affect the VAT status - if the services you are charging for are exempt then the payment is except whether you took it from the thing you intermediated or something else (like cash from the client?!).

Citywire : you will do better to get the real story here and get this right - your readers will thank you for it.

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Mark Stokes

Nov 24, 2012 at 10:03

My silly little example was supposed to be tongue in cheek.

My point is why draw the line at advice? If tax is the issue all ISA and Pension providers should offer a true gross savings product with a sensible payment mechanism.

Of course there is no political pressure for this. In reality an ISA offers very little benefit over an OEIC.

We need to explain to the regulator and our wonderful elected MP's that the majority of what we do involves a sale of some kind and we will evolve and get stronger with RDR.

Eventually the levies of successful firms will increase not only to cover abuse and business failure but an ever expanding MAS as people will can not afford the new highly qualified advisers running profitable business turn them away.

To be honest I don't want to but the regulatory hoops and risk make it less than compelling to be charitable. Fact.

What are all these trade bodies doing. Where is one voice from the Adviser community that can claim any success on this?

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Philip Melville

Nov 24, 2012 at 10:59

I suspect that as we move into next year many will find the task of getting money from clients will be a little more difficult than many anticipate and that very soon the notion of high fees from high net worth will be set aside and income sought from anyone and anywhere,

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Rob Stevenson

Nov 24, 2012 at 16:27

Get yourself a card machine asap.

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Helicopter

Nov 25, 2012 at 21:34

Many IFAs seem to be in denial about RDR and its impact. The days of taking 3% + trail, however it is termed post 2012 are ending. If you are a professional adviser you will charge a fee for your services proportionate to the work involved. Deal with it guys, or get out.

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Arthur Schopenhauer

Nov 25, 2012 at 21:55

@ Helicopter Quite agree we have been undercharging for years Thanks for the advice you are a great candidate for the diplomatic service

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MR C.

Mar 28, 2013 at 15:44

@ Helicopter: Any adviser that wants to remain in business and solvent would do well to charge a fee commensurate with the following factors:-

(a) the amount of work involved,

(b) the complexity of the work involved,

(c) the ongoing potential financial jeopardy in the absence of any 'long-stop'

and

(d) may wish to factor-in a proportion of any tax saving for the client (as 'reward' for advice leading to the the tax saving the client may otherwise have foregone)

If I priced my advice at the 'Peanuts' end of the price spectrum then client perception would be that he/she was dealing with a primate that is slightly less-evolved.

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Julian Stevens

Mar 28, 2013 at 16:14

Points well made Mr C. Access for the masses to affordable advice could be vastly improved by simplification on so many fronts (not least Pensions) and holding the regulator to the provisions and requirements of the Statutory Code of Practice for Regulators. We never hear anything about THAT from Martin Wheatley, do we? Just that the costs of regulation are set to continue to rise exponentially because of the extra demands being placed on those 4,000 poor, overworked and underpaid souls at Canary Wharf.

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