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FSA probes vertically integrated firms' charging plans

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FSA probes vertically integrated firms' charging plans

The Financial Services Authority (FSA) has launched a probe into how vertically integrated firms calculate advice costs, amid concerns some practices may breach adviser charging rules.

The FSA has previously voiced its concerns that vertically integrated firms that provide both products and advice may subsidise the cost of advice with profits made in other areas of its business.

In its retail distribution review newsletter for December, the regulator said: 'We have now contacted a number of these [vertically integrated firms] to obtain detailed information about how they have approached the identification and allocation of the advice costs and how these compare with their proposed revenue and align with their proposed charging model.'

The FSA said that firms may be taking a 'narrow view' on what should be included within the advice costs and could be excluding IT costs, marketing budgets, property charges and costs for business development.

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