A new form of platform cost bundling whereby advisers package platform and adviser charges into a single cost for clients, which was given the green light by the regulator in its platform paper last month, seems to be gathering momentum.
This week, Cofunds, Novia and Ascentric said they would support advisers who want to ‘bundle’ platform costs with the adviser charge, following the Financial Conduct Authority’s move to allow such plans in last month’s policy statement on payments to platforms.
This groundswell of nascent support comes following a warm welcome for the proposals last week from trade bodies such as IFA Centre and the Association of Professional Financial Advisers, which said the FCA’s move was “common sense”.
It seemed an odd move for a regulator that has made transparency at seemingly any cost a priority, but it should help to simplify charges to some degree and, some have argued, put power back in the hands of advisers.
Rebate ban fallout
In other platform paper news, fee-based discretionary managers have given support to plans for a ban on kick-backs from fund managers, after the UK’s financial regulators continued their war on rebates in their recent platform policy paper.
The recent platform paper extended the FSA’s ban on financial advisers receiving rebated ‘commission’ payments from fund managers, which came into force at the end of 2012, to platforms.
Consultations will be launched on extending the principle to industries such as discretionary management and self-invested pensions. DFMs for one might as well support it, I supposed, as it seems inevitable the ban will be read across.
Separately, Parmenion called on advisers to adopt centralised investment propositions to help counter the likely reduction in adviser profitability the platform rebate ban will have due to the pressure it will place on traditional trail income revenue streams.
This is likely to be an ongoing theme, and seems to show that those advisers that rely on commissions and rebates for income will struggle in the post-RDR world. For these advisers, the next two years will see them having to substantially alter their models.
Fighting back on liberation
This week also saw pension providers begin to hit back hard at suspected pension liberation firms to protect unwitting consumers being thrust into potential poverty in retirement, with Legal and General working on a legal interpretation of pension transfer rules to help combat such schemes.
This is part of a broader offensive. Spokesmen for Legal & General, Aegon UK and Suffolk Life have stated they are taking action including blunt refusals and direct customer contact, to protect people against being stung by the huge tax penalties and stinging charges of ‘unlocking’ their pension.
It was also reported this week that police forces in London, Scotland and Cheshire have made arrests following a series of raids on call centres, in connection with an investigation into pension liberation cold-calling operations.
Avid readers will remember that I expressed concerns a few weeks ago as to why more isn’t being done into pension liberation as vulnerable people are being targeted and the regulators do not seem fully to have got their act together.
I am pleased that decisive action is finally being taken. I realise that pension liberation is not always an illegal activity - why it isn’t I do not know - but it is pernicious and can devastate the savings of ordinary people. This is a promising start, but it is not even the tip of the iceberg.
Clawing back clawback
A financial adviser told me earlier this week that he has agreed a £3,000 settlement with a client over commission that was clawed back on a life policy which had been cancelled early, after a drawn out battle that saw the client complain to the Financial Ombudsman Service alleging mis-selling.
However, he was still left out of pocket by £1,200 due to court costs for two small claims summons amounting to £700, solicitors’ fees of £350 and the Fos case fee was £500.
The case raises wider industry issues as, in this instance with Friends Provident, the provider operates a three-month timetable from telling the adviser about the clawback and actually taking the commission.
Should all providers be doing this? Do providers have a duty to inform advisers that they are taking back commission?
Moreover, is this model fundamentally flawed? If clients have the right to cancel policies and place commission at risk, perhaps commissions be paid monthly on such policies so that, in the case of clawback, advisers do not see such substantial sums leave their accounts?
