FundsNetwork unveils adviser charging approach

The levels of these caps are unreasonable but for Skandia to impose them at all seems to me to go against the very idea of removing the provider from the equation. What Skandia seems to be saying is: Yes, we'll facilitate adviser charging but only up to a level that we consider reasonable. Butt out Skandia ~ it's not your place to dictate adviser charging levels or limits.

As for Fidelity FundsNetwork, we use them as little as possible ~ EVERYTHING seems to be a problem.

@ Julian

Do you see any IFA being able to justify charges in excess of those imposed as maximums by Skandia? I think come the RDR it will be an industry standard of 3% + 0.5% if you want to remain in business as the consumer continues to be bombarded with negativity with regard to charges eating into the growth of their investments. That is so long as you can turn a profit based on this level of remuneration.

@ John - It's not the levels that we should be questioning, it's the principle of the fact that they're setting them in the first place. Isn't one of the objectives of RDR to remove all provider influence over the amount and how an adviser is remunerated? What if an adviser is advising on a low fund value and their charging structure applies a minimum amount which translates to >4.5%? If facilitation is the only method of payment that the client wants to consider, that could drive the adviser to recommend an alternative, perhaps less suitable provider.

Julian

After talking to the local Skandia rep I was informed that 5% and above have to be reported to the FSA? They do not want to get involved in that.

However, the devious advisers would charge 4.5% and then up to 3% to switch the funds!!

John.

So if you carry out work for a client where your minimum fee is £500 and there is a pot of £10k how do you recover the fees if the client wants the funds to be less. Say a pension where the fee comes out and the new payment covers the fees and thus tax relief is gained and the client has paid less?

If you modcel works on 3% plus 0.5% then best of luck to you. It depends on what you offer to detirminew the fee. After RDR I believe that fees will increase due to client demand, the costs of the FSA etc to make the business viable for the long term.

Client agreed remuneration should be between client and adviser. Product providers should ensure that they can facilitate whatever is agreed between the client and the adviser.

To put a slightly different spin on RJ's question above: "If facilitation is the only method of payment that the ADVISER wants to consider, that could drive the adviser to recommend an alternative, perhaps less suitable provider." I'll leave you to argue about the so-called retrospective regulation risks in that scenario.

C'mon guys, you're arguing about which people you want to put between you & your client. Those product providers who keep trying to steal your client base, if I'm to believe half the posts I read on these sites. Why exactly can't your client just set up a standing order in your favour? If your client relationships are so great, why do you need faciliation at all?

I don't think I want to be in the end of the market where I would charge a £500.00 fee to invest £10,000.00 for a client, as there is just as much work involved as investing £100,000.00 on the compliance and administrative side of the business. If the £10,000.00 is part of a larger portfolio of available funds then it is not an issue as one would look to be advising the client on the whole is this is a trial investment from a larger pot then you make a commercial decision on whether or not it is viable given the client’s overall worth.

We are no longer in an investment world were time and market forces will soon recoup our fees for the client. We always need to add value, of at least the cost of (taking) V (not taking) advice, and with future competition likely to based largely on charges, it will soon come back to bite those who have charged excessive fees when facing clients with losses some years after taking our advice.

Just read the press reports sighting fees and charges as the main reason for poor pension returns. We live in a blame culture where it must be someone’s fault for every wrong turn made and there is usually a “No Win No Fee” vulture just waiting for the next media / press exposé to jump on the band wagon. Therefore I don’t think it wise to advise the masses with small pots to invest unless you are able to do so at a minimum cost to the client in question.

AC isn't (or at least isn't supposed to be) about percentages. It's supposed to be about agreeing with your client an acceptable charge for the services provided. Of course, it would be useful if the FSA would confirm my understanding of this intent, but the FSA never deigns to stoop as low as making any sort of contributions to forums such as this, so we may never quite know.

As for the mechanism by which the AC is paid, most (no, I know, not all but most) clients still prefer an all-in packaged cost encompassing what's to be invested into the product and the services provided to establish suitability and then get it set up. The FSA recognises this, hence we'll have facilitation via the product provider. For most of us who aren't in the habit of taking 3% of the sum to be invested, no matter how large, the transition should be relatively painless.

Surely, that the benefit to the client be proportionate is the important point here?

A case could be made out for charging £500 to a client with £10,000 to invest but only if the investment was truly long term and likely to recoup the the charges.

Similarly, as pointed out above, the larger investment amounts may not have any more work so we will charge far less as a percentage, but bearing in mind the regulatory cost of taking on larger sums is greater, then a judgement has to be made as to at what level discounts from 'standard' will be made.

The basis of any good deal is that both parties (or all three where an intermediary is concerned) feel that they have secured a good deal. If any feel they have been overcharged or ripped off then that is not a good basis for ongoing business.

It's my understanding that providers are subject to "decency" levels as to how much they will agree to facilitate through products, platforms etc so not sure how Fidelity get away with the no maximums policy.

The writing is on the wall gentlemen. Charge your clients directly for your services. Relying on product providers is flawed. You will see early next year the first complaints that part of a clients ISA allowance was taken up in advice charge and therefore the client couldn't use their full ISA allowance.

The real question that we ought to be asking Fidelity (once they announce their new unbundled charging structure) is whether they will pass ALL rebates on to the customer or will they keep part. If they keep part then look forward to a price hike at the end of 2013 ahead of the rebate ban.