Platforms may review their novation processes as a result of the Financial Conduct Authority’s comments about adviser firm consolidation, Bill Vasilieff has claimed.
The chief executive of Novia Financial was speaking after the FCA issued a paper about consolidation in the financial advice industry which also raised questions for platforms.
The FCA found instances where it was not clear how a retail investment provider, or platforms, could have obtained or validated a client's instructions, when the acquiring advice firm had not established the client’s agreement to the adviser charge.
FCA rules require retail investment providers and platforms to obtain and validate instructions from a retail client in relation to an adviser charge they offer to facilitate.
Mr Vasilieff said: “Novia was set up to facilitate adviser charges that have been agreed by the advisers with their customers a long time before the implementation of Retail Distribution Review (RDR).
“Novia validates the instruction with customers when accepting new business.
“The consolidation of adviser businesses is dependent on the legal arrangements of any deal.
“The FCA recognises that the obligation is with the adviser firm to ensure they can continue to receive the adviser charges agreed by the former adviser firm.
“I expect that platforms will be reviewing their arrangements for processing novation agreements in light of the FCA comments.”
Mike Barrett, consulting director at research firm The Lang Cat, said platforms would be checking their processes following the FCA's remarks but was sceptical it would result in any changes.
He said: “The interesting part for me is that the way platforms administer an adviser charge instruction varies widely across the industry.
“Every platform has the same responsibility to ‘obtain and validate’ the client instruction to facilitate an adviser charge, but the way they achieve this differs.
“These differences can create difficulties for advisers in normal circumstances, with an inconsistent advice process if they are using more than one platform.
“If a business is changing ownership then these inconsistencies could create a risk of either the provider or adviser firm falling foul of the expectations to obtain and validate”
A number of platforms stressed their systems were already robust when it came to this issue.
Justin Blower, head of sales at Ascentric, said: “Ascentric has always sought to be transparent over the issue of adviser fees and we will never facilitate any fee to an adviser unless Ascentric has seen a signed fee agreement by the client.
“We also confirm to the customer in writing the amount of fee being paid to the adviser at the time of their investment, to ensure the customer is aware of the level of advice fee they have agreed to.”
An Aviva spokeswoman said the company considers its processes against regulatory guidance on an ongoing basis.
She said: “We insist that a discretionary fund management form, outlining details of any charges, is signed when moving to any new investment process.
“We would need written client instructions if an explicit adviser charge was being added.”
A Standard Life spokeswoman said: “We are not aware of any issues. We send clients an adviser charging ‘receipt’ every time a new charge is agreed or an existing charge amended.
“This is designed to ensure absolute clarity between client and adviser when we are facilitating the charge on both parties’ behalf.”
An Aegon spokesperson said: “The FCA paper highlights the many different situations which can arise when a new firm ‘acquires’ a client from another firm and is a helpful reminder of the roles of each party.”
Nucleus and Transact were asked to comment but did not respond.
damian.fantato@ft.com
