Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

FSA to restrict wealth manager fees on distributor influenced funds

2 Comments
FSA to restrict wealth manager fees on distributor influenced funds

Wealth management firms will be banned from collecting anything more than an advisory fee on their distributor influenced funds (DIFs) once the retail distribution review (RDR) comes into effect.

Finalised guidance by the Financial Services Authority (FSA) said firms running DIFs will no longer be able to receive a share of the annual management charge (AMC) or any benefit other than an adviser charge.

The UK watchdog added that adviser charges for recommending DIFs should not vary ‘inappropriately’ from competing retail investment products and is concerned that firms that have DIFs could be presented with a potential conflict of interest.

‘A firm’s desire to make an administrative cost saving or to increase the firm’s acquisition value should not lead to customers being recommended a distributor-influenced fund when this not be in their interests,’ said the paper.

The paper added that firms that recommend a product run by a connected firm, such as a DIF, should give evidence that the advice was unbiased, suitable and in accordance with conflict of interest requirements.

These requirements include the disclosure of any connection with the fund and an analysis of potential incentives to recommend the DIF such as equity stakes, free holidays and bonus entitlements.

The FSA also advised that firms will have to ‘rigorously’ assess the suitability of DIFs for their clients and record the reasons for any decision to use them.

According to the published guidance, one of the questions wealth managers should consider is whether the asset allocation of the DIF could unbalance the overall client portfolio weighting.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play French fund CEOs: 'Brexit is a lose-lose situation for all of us'

French fund CEOs: 'Brexit is a lose-lose situation for all of us'

'We'll all lose out - but London is an international city, Paris is not.' Leading French asset management CEOs tell us what they think Brexit will mean for the investment business.

Play Henderson Eurotrust's Stevenson: dealing with European cynicism

Henderson Eurotrust's Stevenson: dealing with European cynicism

Tim Stevenson talks about where he finds his opportunities in the current environment in Europe

Play Mark Barnett - part 2: why I'm not buying Lloyds

Mark Barnett - part 2: why I'm not buying Lloyds

In the second part of our exclusive video interview, Barnett explains why he has no intention of buying Lloyds, and where he sees the greatest income opportunities.

Read More
Wealth Manager on Twitter