Questions have been raised in relation to Retail Distribution Review adviser charging rules after a wealth management business launched an offer to remove all advice costs for self-invested personal pension clients.
Discretionary wealth management business Westbury Private Clients last week launched a self-invested personal pension package for which it says it will pay both the adviser fee and product provider charge on behalf of the client.
The firm said in a statement that “the groundbreaking new service will see those saving for their retirement enjoying unprecedented access to a Sipp at no cost”.
Matthew Robinson, head of private clients at Westbury said: “From the client’s perspective, the cost of setting up the full Sipp will be £0 with the ongoing costs of the Sipp and the pension advice also amounting to £0.
“Where Westbury makes its money is the 1 per cent annual management charge and clients can choose from either a tailor-made investment portfolio, or highly diversified portfolios that invest in five or more asset classes. Both can focus on income and/or growth depending on the client’s requirements.”
The Sipp must have at least £250,000 for Westbury to manage. Talbot and Muir will act as the Sipp administrators. The firm stated that terms and conditions apply.
When FTAdviser approached the Financial Conduct Authority with a hypothetical but similar case, the regulator said it raised questions to whether it might circumvent RDR rules on cross subsidy and transparency.
James Goodchild, chief investment officer and founder of Westbury, told FTAdviser: “Westbury is paying an IFA on one hand and Talbot and Muir on the other. The financial adviser will bill Westbury for that pension advice and we will reimburse the adviser so the client doesn’t have to pay that.”
Mr Goodchild later clarified his statements, apologising for his “poor use of English” when he said that the repayment is made to the adviser firm.
He said: “The adviser charges the client for pension advice which the client then pays directly to the adviser for said pension advice, and the amount charged simply happens to be paid back to the client by Westbury Private Clients.”
The firm stated that when an adviser recommends the Westbury Sipp, he or she bills the client as normal. The client initially pays the adviser, and Westbury would subsequently rebate that full amount back to the client.
One question for the regulator is whether such a charging structure might encourage advisers to purport to be offering a free service to customers when recommending the service, as the full cost will later be rebated. Under the RDR there is no rule specifically banning this practice.
In essence RDR rules mean the cost of advice cannot be recouped from a source other than direct, clearly labelled payments from the client.
