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Novia unveils RDR-ready proposition

by Jun Merrett on Dec 11, 2012 at 10:17

Novia unveils RDR-ready proposition

Wrap Novia has announced it is now ready for the retail distribution review (RDR) and has started trading with its RDR-compliant model from today.

The platform has changed its documentation replacing the word commission with adviser charging.

The platform will make further enhancements in January 2013 including the introduction of online ad-hoc adviser charging and also move to allow initial and ongoing charges to be stated as a percentage or fixed monetary amount.

Novia chief executive of Bill Vasilieff (pictured) said: 'We are delighted to be in a position to announce that as of today the Novia platform meets all the necessary requirements to be RDR compliant.

'The changes required by the RDR can only be a good thing for the industry, forcing a drive towards greater professionalism as well as a focus on client servicing. We are delighted to be a in a position to provide this ahead of schedule to our supporting advisers.'

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56 comments so far. Why not have your say?

Dave jones via mobile

Dec 11, 2012 at 11:08

Is this a joke? They have changed the word commission to adviser charging!!!!!! Oh dear. Lets hope citywire have got this wrong. If not expect a call from the FSA very soon novia.

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Simon P via mobile

Dec 11, 2012 at 11:11

I agree Dave. This is shocking and the most worrying thing I have read on RDR to date. The FSA have been very clear that you can't just relabel commission as adviser charging. This is embarrassing.

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EVHE

Dec 11, 2012 at 11:21

If only all Novias competitors knew RDR was about changing just one word they could have saved a fortune in RDR development !

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Simon West

Dec 11, 2012 at 12:05

If you check the press release on their website its worse still:

"The removal of the term 'commission' has been the only significant change required, as the change is in name only - it remains client agreed remuneration as it has always been with Novia."

Unbelievable! Do they even have a compliance officer?

The FSA will have a field day with these guys. I really hope they make an example of them.

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Sam Matthews

Dec 11, 2012 at 12:12

You would think with the stories from the last 12-24 months about providers spending millions on RDR that someone at Novia would have said 'how come we are only spending £2.50 on our changes - are we sure about this???' Someone is going to be very busy when the FSA get a whiff of this - what was it the Sherriff of Nottingham said - 'Christmas is cancelled'

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Novice

Dec 11, 2012 at 12:31

I don't really understand the problem.

if Novia have always paid "commission" to advisers as a reduction in the Client's investment (out of a cash account) and only used the word "commission" to suit the market at the time, what is the problem with just amending their literature?

As far as I can tell, Novia has always been structured as a Full Wrap and has never paid commission to advisers out of their own pocket (and not charged the client a higher Fund charge to compensate). All Fund rebates go to the client account and Novia charge a set amount directly to the Client.

Furthermore, given the debate over VAT on commission vs Fees, it may have been better to the client for the term "commission" to be used at the time.

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A Smith via mobile

Dec 11, 2012 at 12:45

I suggest the first 5 bloggers do their research properly before commenting! Clearly they don't understand.

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Simon West

Dec 11, 2012 at 12:53

@Novice

The main problem is the treatment of legacy assets and disturbance. There are lots of rules that require the wrap provider to differentiate between legacy and new advice. Especially around switching of commission when investments are disturbed. It doesn't matter that remuneration was client agreed or taken from the cash account or anything else. It wasn't Adviser Charging therefore its legacy, therefore the legacy rules apply.

If I used Novia I would stop writing any new business with them. All other wrap providers that I'm aware of, have detailed disturbance guides and plans for pre and pot RDR business rules and have been communicating them for some time. Novia seem blasé and and unprepared in regards to AC and RDR. I fail to see how an enterprise of this size is so unaware of the gravity of the changes that they would even publish a press release seemingly so ignorant of the nature of the RDR changes.

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Simon West

Dec 11, 2012 at 13:00

@A Smith

I did my research, I suggest PS12/3 if you require clarity.

"PS12/3:

1.1 This Policy Statement (PS) follows CP11/261, which covered the treatment of ‘legacy assets’ under the Retail Distribution Review (RDR) adviser charging rules. By ‘legacy assets’, we mean retail investment products purchased by a retail client before the RDR rules come into effect on 31 December 2012 and which the client is still holding when the rules are in force."

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Simon p via mobile

Dec 11, 2012 at 13:21

A smith - please enlighten us then. The fsa have been very clear that you cannot simply re-label commission as adviser charges. Simon west makes goo points on legacy. Don't know I Novia do a bond but if nothing's changing are they currently counting remuneration towards the 5%? What about obtain and validate rules which the fsa recently wrote very strongly to providers about. Come on A Smith - enlighten us.

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Paul Boston@ Novia

Dec 11, 2012 at 13:45

Since inception of Novia (2009) we have effectively always facilitated adviser charging/ client agreed remuneration. We termed it "commission" as this was a familiar term at that time

The "commission" (CAR) was always agreed by the client & taken from the client cash account on a 1for1 basis This proposition was in essence RDR ready from inception not dissimilar to an HD ready television at the time. as a parallel, I suspect people buying a television at this time which wasn't HD ready now feel its time for an upgrade

I do agree it is hard to believe that many of our competitors have spent such vast amounts of money with a large number still not ready

Please get in touch because we are very happy to discuss Novia's arrangements

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Aristotle

Dec 11, 2012 at 15:30

Simon

"It doesn't matter that remuneration was client agreed or taken from the cash account or anything else. It wasn't Adviser Charging therefore its legacy, therefore the legacy rules apply."

Not correct at all. As long as Novia have met the obtain and validate rules on prior business, there is nothing for them to do other than amend their terminology.

This is the same for Transact too.

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Simon West

Dec 11, 2012 at 15:58

@ Aristotle

Ok. All I can say is other platforms, AXA Elevate and Standard Life for example, take a different view. We'll see in time no doubt.

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Aristotle

Dec 11, 2012 at 16:06

That is because they are "life company" platforms that have had numerous methods of adviser remuneration in the past.

I think it just goes to demonstrate that a) the rules are confusing and b) not all platforms are the same.

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Paul Boston@ Novia

Dec 11, 2012 at 16:28

Since inception of Novia ( 2009) we have effectively always facilitated adviser charging /client agreed remuneration. We termed it "commission" as this was a familiar term at that time

The "commission" (CAR) was always agreed by the client & taken from the client cash account on a 1for1 basis This proposition was in essence RDR ready from inception not dissimilar to an HD ready television at the time. as a parallel, I suspect people buying a television at this time which wasn't HD ready now feel its time for an upgrade

I do agree it is hard to believe that many of our competitors have spent such vast amounts of money with a large number still not ready

Please get in touch because we are very happy to discuss Novia's arrangements

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OilCan

Dec 11, 2012 at 16:33

Perhaps the first posters are missing the fact that Novia has always been developed as RDR ready?

If they had realised this or carried out their research, they wouldn't have cause to be so surprised.....

What's that you say? RDR ready platform doesn't have to spend millions on developing it's system to be RDR ready? Surely not!!

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Sally jones via mobile

Dec 11, 2012 at 16:48

Why are they not launching adhoc AC and changes to their ongoing and initial until next year. Sounds like they forgot about RDR and then earlier this month someone realised RDR rules come in this year and so they cracked open the marker pens and crossed out the word commission on their literature. How could they be RDR ready when they launched before the RDR rules were drafted. What? A platform that claims to be RDR ready before the RDR rules were finalised? Surely not

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Simon p via mobile

Dec 11, 2012 at 16:53

Most RDR rules werent finished in 2009 so your RDR ready platform was based upon rules that have changed massively. It's like curry's telling you that a telly you bought 15 years ago before HD existed is HD ready because they crossed out the word 'colour' and replaced it with 'HD'

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OilCan

Dec 11, 2012 at 17:22

@ Sally & Simon

Isn't it largely irrelevant when the RDR rules were first drafted? Novia has always marketed itself as a platform for RDR. So since 2009 I'd imagine they've developed their business alongside the developing RDR regulations.

Coming back to that telly; if don't know about the inner workings of the telly you've bought you may well have been duped into buying an 'HD ready' telly with the colour sticker simply crossed through. Although most people making a purchase like that would first do a bit of research, due dilligence if you will, around what it is they are buying and make their own mind up.

Perhaps do the same with Novia, before writing off their RDR credentials in view of the world (or the readers of citywire). Sounds sensible doesn't it? Unless of course the assertion that the content of this article simply must be untrue is being made for other reasons.....

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Simon P via mobile

Dec 11, 2012 at 19:40

Oilcan - looks like we are both making assumptions - you are assuming they've developed their business alongside the changing RDR rules and I'm assuming they haven't. Whichever way you cut it I think it is very foolish of them to come out and say all they have done is re-label commission as AC as this is exactly what the FSA said you shouldn't do. Also, as Sally points out why are they making changes to their AC options next year if they are so RDR ready. Just sounds to me like they have messed up. No ulterior motive - just very concerned that providers are all doing different things and to be honest I take more comfort in those that have made sizeable changes than those who are simply saying they don't need to. I really worry these companies have underestimated the complexity of the rules and how the FSA will enforce them.

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Jimmy via mobile

Dec 11, 2012 at 20:38

3rd para about charges

Unless these are ready January 2nd, then it's hardly rdr ready

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Amy Adams via mobile

Dec 12, 2012 at 08:49

So they have had to make no changes other than cross out the word commission and they still need to do further work on their AC options next year. What an absolute joke. What on earth have they been doing all year. Everyone else seems to be busting a gut to get their RDR changes done and Novia have decided not to bother and may get round to it next year. Embarrassing. This article is so ridiculous I presumed NMA had just got it wrong but the press release on their website confirms it. I absolutely despair. Looks like the life companies like standard and AXA are taking this seriously and the non life co platforms are treating it as a joke. This 'we launched in 2009 ready for RDR' is just wrong. It's like saying your business is MiFID 2 or solvency II ready and therefore refusing to make any changes. Until the rules are finalised you can't possibly know.

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Aristotle

Dec 12, 2012 at 09:02

I think that it's quite clear from the above comments that most do not know what being RDR ready actually means for platforms. There are regulatory requirements that need to be in place before the end of the year - which Novia have done. Anything else is not obligatory and up to each and every platform to develop in order to make things easier for their users and clients - such as a solution to avoid the AC biting into the 5% tax deferred income from an onshore bond or additional charging options, such as ad hoc fees, fixed monetary payments etc. These are nothing to do with being RDR ready.

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Novice

Dec 12, 2012 at 09:36

@ Jimmy (11/12/12)

"The platform will make further enhancements in January 2013 including the introduction of online ad-hoc adviser charging and also move to allow initial and ongoing charges to be stated as a percentage or fixed monetary amount."

I think the issue with the article is the way its written (and the press release on their website is the same).

Novia already facilitate ad-hoc adviser payments by completing a form. They are introducing this facility on their online system in January.

With regards to allowing initial ongoing charges being stated as a % or Fixed monetary amount - this is already the case. However, I don't think the system currently facilitates a combination of the two (i.e. Fixed up-front amount with % On-going) which is what they are implementing in January.

Therefore, the platform would appear to be fully RDR "ready" but they are looking to enhance the functionality.

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Novice

Dec 12, 2012 at 09:39

@ Amy Adams (12/12/12)

If I was Diploma qualified at the beginning of 2012 and only had a couple of Gap-Fills to do during the year, does that mean I am less ready than someone who had to do 5 exams and "bust a gut" during the year?

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Simon p via mobile

Dec 12, 2012 at 09:42

Aristotle - you are right that AC options are not mandatory however they are a key part of how advisers and clients will operate post RDR and so I would hope any serious player would treat these options as key to their business and deliver them in time for RDR. RDR is about much more than doing the bare minimum to meet the rules. Those that do the minimum only will realise their errors very quickly. As for your comments on bonds - there is no 'solution' to the 5% rule - if a withdrawal is made from the bond it counts towards the 5 %. Adviser remuneration is a withdrawal. This isn't a new RDR rule it is an hmrc rule and if Novia have always been doing AC/adviser remuneration as they say then they should have always been counting the adviser payments towards the 5%. I'd be interested to hear Novias views on this point.

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Amy Adams via mobile

Dec 12, 2012 at 09:57

@ Aristotle - a more accurate comparison would be 2 advisers one who was busting a gut to get their qualifications and review their business model against another who had all the qualifications and so would meet the fsa rules but was planning to look at their business model some time in 2013. There is being RDR ready in terms of compliance and being RDR ready in terms of ensuring your business is competitive. Those who do both will do well. Those that focus on bare minimum compliance will fail in a very cut throat industry

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OilCan

Dec 12, 2012 at 10:01

@Amy Adams

Read what Novice has written and it seems as though your assumption that Novia have done the bare minimum may be incorrect. IT may appear they have done the "bare minimum" compared to those"busting a gut" because they were more prepared to begin with.

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Amy Adams via mobile

Dec 12, 2012 at 11:12

@ oilcan - read the recent dear CEO letter from the fsa where they say simply re-labelling existing fees/commission as adviser charges is not acceptable. The fact that Novia issued a press release stating that is all they have done just shows they have got this wrong.

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OilCan

Dec 12, 2012 at 11:42

@Amy Adams - Its clear from the discussion here and evidence freely available from various sources that the changing of the commission label is not all Novia have done. It just happens it is all they had left to do this close to the deadline.

It just seems odd and a little counter intuitive to me to vilify a business who's model meant they were well prepared in advance of the deadline. Whilst applauding those who got their business model wrong, sat on their hands and are having to scrabble around making a big song and dance about getting ready in time..... I know which business I'd rather be involved with.

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Amy Adams via mobile

Dec 12, 2012 at 12:22

The info freely available on their website is that they have 'switched the words commission to adviser charging' and this Is what the FSA have said is likely to be unacceptable. It really is as simple as that.

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Simon West

Dec 12, 2012 at 12:50

I'd be interested to know about the disturbance plans that Novia have in place.

For example, if they have been paying ongoing commission based on % of the investment and the adviser switches a fund will this switch off the payment.

My understanding is that where UT and OEICs are concerned this is the case, regardless of where the money is being paid from i.e. the cash account.

To continue the payment new confirmation of the client agreeing to adviser charging is required. This is the interpretation for other 'designed for RDR platforms'.

Perhaps Paul Boston@ Novia would care to comment.

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OilCan

Dec 12, 2012 at 13:05

@Amy Adams - Why not speak to someone at Novia to get the rest of the story about how they have achieved 'RDR readiness'? Seems sensible to get the full story before assuming that the contents of this one press release is a summary of all action taken to become RDR compliant......

The proof will be in the eating, will Novia get hauled up infront of the FSA for being non-compliant? I doubt it.

I say well done to the Novia team for developing their business model in line with RDR and therefore not having to scramble around with expensive last minute changes to ensure compliance.

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Amy Adams via mobile

Dec 12, 2012 at 14:27

Oilcan - you may be right and they may have done lots of other changes but their press release states they have done exactly what the fsa wrote to their CEO to state was unacceptable so I would say that it is certain that they will be hauled in front of the fsa to explain their comments. The fsa clearly stated in the letter that they have concerns about providers approaches to 'obtain an validate' and 're-labelling commission' and Novias press statement will be like a red rag to a bill.

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Compliance expert via mobile

Dec 12, 2012 at 14:28

Amy - I agree 100% - Novia will get a call about this!!!

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OilCan

Dec 12, 2012 at 15:14

Presumably the FSA was referring to commission in the old fashioned sense and not the type Paul Boston @ Novia refers to:

"Since inception of Novia ( 2009) we have effectively always facilitated adviser charging /client agreed remuneration. We termed it "commission" as this was a familiar term at that time"

It sounds to me like the FSA's concerns of which you speak regarding relabeled commission were more to do with those platforms that actually operated old fashion commission arrangements renaming these. Rather than their concerns being centred around what Novia has done.

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Compliance expert via mobile

Dec 12, 2012 at 15:29

Oilcan - you should never make assumptions where the fsa is concerned. I've seen the dear CEO letter and it specifically states fee's/commission should not be re-labelled so they will indeed be interested in what Novia has done. Novia may be ok - I am not suggesting otherwise - but their statement will attract attention from canary wharf as it goes dead against the very clear warning all CEOs were given only 6 weeks ago.

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Aristotle

Dec 12, 2012 at 18:02

READ SLOWLY

Novia have NEVER paid commission.

They have operated CAR

They have obtained the client signature and validated it as is required for adviser charging

They previously used the term "commission" as it was a more commonly understood term

It isn't and never was commission

They could have called it anything they liked

They are not calling it "commission" anymore

REMEMBER - it never was commission anyway

This is not what the FSA regard as re-labelling - as REMEMBER

IT WAS NEVER COMMISSION IN THE FIRST PLACE.

It was just a name they chose to use for CAR.

@compliance expert - I suggest you change your name as it is clear you are not an expert in compliance.

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Aristotle

Dec 12, 2012 at 18:04

@ simon west

Novia do not need any disturbance plans as they have never paid commission and do not have any legacy issues.

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Simon West

Dec 12, 2012 at 18:24

@ Aristotle

The historical Aristole was wise. You may need to rethink your name.

Is doesn't matter what the remuneration was called AT ALL.

Read PS12/3. Slowly.

Was a retail investment ADVISED ON prior to 1/1/13?

If so, this is a LEGACY ASSET.

LEGACY ASSETS are subject to LEGACY ASSET RULES.

This means they are subject to disturbance rules. This means if you are receiving ANY type of remuneration, it must stop if disturbed.

You can start a new remuneration if the client agrees to ADVISER CHARGING. Handy hint: Some signature agreeing to 'commission' from the 'cash account' or otherwise won't cut it.

Also, FYI. You need to account to the FSA on the RMAR between AC and LEGACY REMUNERATION.

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Compliance expert via mobile

Dec 12, 2012 at 21:54

Simon - well said

Aristotle - Your clear ignorance of RDR rules undermines your patronising response. Commission isn't the point. Had you bothered to read my post you would see that the dear CEO letter refers to commission/fees. The fsa are making a distinction between pre and post RDR remuneration and have specifically written to each provider on this point. I suggest your time would be better spent reading the rules. I wonder if you actually work in Novias compliance dept - that would explain a lot

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Aristotle

Dec 12, 2012 at 22:18

Well obviously you all know better than Novia, Transact, Nucleus and all the other non life company wraps. What an interesting day 1st January will be when the FSA ask them to stop trading as they are in breach of RDR legislation.

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Simon P via mobile

Dec 12, 2012 at 22:30

Nucleus have issued a disturbance form for their bonds to differentiate pre and post RDR remuneration. I'm not aware that transact have just crossed out the word commission on literature. Novia seem to be on there own on this one. I am still waiting for someone to explain whether Novia currently count adviser remuneration towards the 5% as they are supposed to if they are currently doing adviser fees and aren't making any changes for RDR. Will they suddenly start counting any payments post 31/12 towards the 5%. Please can someone explain this? Aristotle - you seem to be an expert on this. Any views?

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Aristotle

Dec 12, 2012 at 22:54

No idea about Novia on this one. For new bonds after 31/1/2/2012 I understand from their recent Adviser Update that Transact are introducing a facility whereby adviser payments and investment management fees can be paid from cash in a separate General Investment Account. For existing bonds, they will offer the client the option to open a new bond if a top up is to be made and the fee paid from a GIA.

Unless Novia have a similar solution, then AC taken from a new bond next year will count towards the 5% and also if an existing bond is topped up. This is a separate discussion from the above comments.

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Simon p via mobile

Dec 12, 2012 at 23:04

It's the same discussion. If Novia have always been doing adviser charging/CAR (as you keep saying) then they should always have been counting it towards the 5%. If they haven't always been counting it towards the 5% then they will clearly need to differentiate pre and post like nucleus via a form. This all boils down to pre and post RDR remuneration being treated differently and not just re-labelled.

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Compliance expert via mobile

Dec 12, 2012 at 23:10

I agree this is all the same discussion and comes back to differentiating between pre and post RDR remuneration.

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Aristotle

Dec 13, 2012 at 07:45

Oh dear - I can only think that you are either wind up merchants or have been reading the FSA adviser charging rules in a dark room. I give up.

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Alan west via mobile

Dec 13, 2012 at 08:58

Read all these comments with interest. One would hope Novia have done their homework and are ok. I haven't seen the CEO letter but if the content I as reported then it does seem that Novia's statement conflicts with this. I seem to recall standard life making a lot of noise about this letter a few weeks back. Aristotle - your comments seem to continually ignore the references people are making to this letter. It looks like you have been reading the rules in a dark room and not looking at the wider picture. As I say I would hope Novia have thought this through but their statement is bizarre if the content of the CEO letter is as reported. Not sure why you are so blind to this Aristotle. Ignorance is bliss.

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Eddie vedder via mobile

Dec 13, 2012 at 13:15

Aristotle - I suspect you are right and some of these people are wind up merchants but this CEO letter is intriguing and you keep sidestepping this. Regardless of whether Novia comply with the rules or not it is terrible PR!!! I think your inference that the fsa won't take action against some of the platforms is laughable and shows you know nothing about the fsa. If any platforms or life co's flout the rules the fsa will come down hard and make examples of them. When they issue dear ceo letters they are very serious and this is a clear warning shot and ceo's should ignore at their peril. Not suggesting any of the platforms named have flouted the rules - just making the point that the fsa don't like being ignored!!

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PippaRussell@Novia

Dec 14, 2012 at 15:05

We are really pleased that we were able to deliver our RDR functionality ahead of the game and at minimal cost and disruption to our advisers and their clients. If you would like to read more about what the changes mean for Novia IFAs and clients, you can go to our website to read our 2012 RDR review. Link attached below.

http://www.novia-financial.co.uk/media/39945/impact_assessment_doc.pdf

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Aristotle

Dec 14, 2012 at 16:38

I wasn't sidestepping anything and if you read the note from Novia as above - you will see that everything I have said is 100% correct.

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Amy Adams via mobile

Dec 14, 2012 at 21:51

Thanks pippa - not many companies take the trouble to clarify things. You have gone to great lengths to make it clear that your current remuneration isn't commission however the fsa's dear CEO letter doesn't single out commission specially but refers to all pre RDR remuneration - ie commission or fees and that providers shouldn't just re-label pre RDR fees as adviser charging. Any comments on the fsa letter?

Aristotle - you are 50% right at best.

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Jon hardacker via mobile

Dec 14, 2012 at 23:42

Paul Boston will sort it all

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Aristotle

Dec 15, 2012 at 09:14

Amy - I'm more than certain that I'm 100% right at worst

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Amy Adams via mobile

Dec 15, 2012 at 09:58

At aristotle - the main comment of yours is disagree with is 'This is not what the FSA regard as re-labelling - as REMEMBER

IT WAS NEVER COMMISSION IN THE FIRST PLACE.

It was just a name they chose to use for CAR.' This is where you are fundamentally wrong. The dear CEO letter clearly refers to commission AND fees (ie CAR). They are saying that providers simply shouldn't relabel pre RDR remuneration as adviser charging. To keep going over and over the point that it isn't commission is missing the FSAs point.

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Eddie vedder via mobile

Dec 15, 2012 at 10:55

Given Novias track record I am fairly sure they have thought this through properly and this was just a bit of badly worded PR. however Amy does continue to make a good point about the continual referral to the fact it isn't commission but CAR when the FSA letter referred to both.

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