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.