DFMs urge clarity on adviser charging rules
DFMs say more clarity is needed on adviser payment rules.
The FSA must clarify how advisers who recommend discretionary fund managers (DFMs) can be remunerated under the RDR, DFMs have said, after the regulator said it would issue a consultation on the subject in the autumn.
The FSA said the consultation would aim to make it clear that DFMs cannot pay commission or any other inducements to advisers who are outsourcing their clients’ investments to a DFM.
However, discretionary providers have called into question whether the consultation will apply to direct contractual relationships between a client and DFM.
Tony Allan, partner at Vestra Wealth, welcomed the clarification and said that the FSA needed to make it clear that the rule applies, particularly when advisers are outsourcing through a third party platform, rather than for direct bespoke investments.
“I’ve got knowledgeable top-end IFAs saying, “I don’t get this,” and that’s a concern,” he said. “It needs clarification.”
The FSA said the consultation will focus on how adviser charging rules apply to the relationship between the adviser and the DFM and will address the issue of platforms in that relationship. But it said in situations where there was a direct relationship between a client and a DFM, the arrangement was “non-advised and RDR does not apply”.
Ian Lowes, managing director of Lowes Financial Management and founder of StructuredProductReview.com, said the arrangement left a “back door for commission” - which the RDR was intended to outlaw.
Bruce Ely-Johnston, head of adviser solutions at London & Capital, said the consultation was “in line with what we expected to be in place from the first of January” and was not likely to change what his firm already had in place for their adviser relationships.
But he said the rules were still unclear and there were “a few things that could use further clarification across the board”.
“The FSA doesn’t want to be too prescriptive. They just want to provide general guidelines,” he said. “As a result, it does make things a bit grey.”