The FSA is examining adviser charging in three ways – first, asking questions about a firm’s documented charging structure, before drilling down into the detail of initial charges and ongoing services.
It is asking whether an adviser charging document has been produced (and if not, when it will be ready). It is also interested in how the charges are disclosed to clients, at what point this is done, and how the agreement with the client over the charges is recorded.
Initial adviser charges
Onto initial adviser charges, and the FSA’s questions become a lot more detailed. It wants to know what payment methods are offered, and what proportion of clients use them. It has identified five different categories of payment:
- Direct payment – cheque, card, cash
- Facilitated through a platform…
- …or a product provider
- ‘Don’t know/ unsure’ ( I’m guessing the FSA will be paying particular attention to those ticking this box)
It asks advisers whether they allow clients to pay the initial charge by instalments for advice on regular payments (and if so over what periods are allowed), and whether instalments are offered in any other instances. It also wants to know if firms have arrangements to recoup charges if policies are cancelled before all instalments have been made.
Finally on initial charges, the FSA asks if initial charges are solely contingent on products being taken up.