FSA action plan misses the mark

With RDR less than 12 months away, the FSA chose February as the opportune time to release its action plan for firms entitled ‘RDR: is your firm on track?’.

The eight page guide, which equates to more like four pages of actual content, highlights points that advisers may need to consider around professionalism, independent or restricted advice and fees and business models.

While it may be a useful checklist, it could be argued that anyone not already on the road to being RDR compliant could have benefitted from it more than a year before the deadline.

Elsewhere, another month brings another prediction of how exactly advisers will earn a living after December 2012.

A survey of 283 advisers by accountancy firm BDO said that, post RDR, advisers will decrease initial fees and instead raise ongoing charges.

Based on a specimen investment of £50,000, average pre RDR fees are 2.9% initial followed by 0.6% pa trail.

However, the survey showed that advisers expect the initial charge to fall to 2.8% but raise the ongoing charge to 0.8% pa. Meanwhile, those planning on levying an hourly rate expect to charge £160 per hour on average.

In yet another regulation update, HM Revenue & Customs confirmed the position for advice and VAT post RDR.

According to the draft guidelines, advisers will not have to pay VAT on advice as long as it leads to a product transaction.

The guidelines said that advice could cover a “broad range of scenarios” around recommendation, referral and intermediary work, which would, as present, continue to be VAT exempt.

Pure financial advice that does not lead to a product sale, however, will be subject to VAT.

Wrapping up this month’s RDR developments was Derek Bradley, chief executive of advisory portal PanaceaIFA, who expressed concern that raising awareness of RDR is not accounted for in the FSA and Money Advice Service’s budgets.

Instead he fears that advisers will be left to pick up the responsibility – and the tab – of making consumers aware of what the RDR is and what it actually means for them.

aimee.steen@ft.com