This is in line with Mr Chan’s view. He explains any ongoing adviser charges covers the cost of an ongoing adviser service, such as financial planning and investment reviews.
“Any adviser being paid ongoing fees is responsible for the suitability of the product and underlying investments for the client.”
Mr Chan adds: “The fee and service can be stopped at any time so there would be no further deductions from the client’s investments.”
In its adviser charging factsheet, the FCA, says: “Ongoing charges should only be levied where a consumer is paying for ongoing service, such as a performance review of their investments, or where the product is a regular payment one.”
Funds under service
So if RDR banned commission, then how do percentage fees charged for funds under service compare to commission?
Ms Harle says: “While some adviser charges look similar to commission payments, for example, an initial charge of 3 per cent of a lump sum investment is levied, the critical difference is that the specific amount is determined by the adviser, not the product manufacturer.”
Alastair Lewis, senior business development manager at Blackfinch, says: “Ongoing commission fees were generally paid out of annual product charges, as opposed to the encashment of funds invested.”
“Therefore it did not appear that monies were being deducted from the funds. It was wrapped up opaquely within product charges,” Mr Lewis adds.
saloni.sardana@ft.com
