Financial Conduct Authority  

FCA questions adviser charging models

FCA questions adviser charging models

The Financial Conduct Authority has told advisers it does not expect them to be "charities" but has raised questions over charging models - especially in decumulation. 

Speaking at the Personal Finance Society's annual conference in Birmingham yesterday (November 28) Debbie Gupta, director of life insurance and financial advice at the FCA, said she recognised adviser charging was an "emotive" subject.

Ms Gupta said: "We don’t expect advisers to be charities, everyone should be paid a fair amount for the services that they provide - but we do expect you to consider the conflicts that will arise, including how you structure your charges to ensure this does not lead to consumers suffering harm.

"Take for example the charges on ongoing advice. Most advisers that we see are charging a percentage of the client's assets and this structure works well for clients who are building their wealth.

"Is it the right structure for people who are withdrawing their assets? Each withdrawal reduces the level of fee you receive and over time that fee income can drop significantly." 

Ms Gupta added: "At the same time, client circumstances may be getting more complex - as they age they become more vulnerable, they may be less able to visit you in your offices and they may need more care from you.

"We would be really concerned if long standing clients were priced out of advice just at the point when they need you the most. 

"After all helping people make decisions on withdrawing assets for use in retirement is as essential as advising on how to invest those assets.

"So how does your charging structure work and is it future-proofed against that evolving market?"

The FCA recently closed its consultation on contingent charging, launched when the regulator found too many consumers were being advised to transfer out of their defined benefit pensions.  

The proposal has been met with mixed responses from the industry, with major players including the PFS and the Personal Investment Management & Financial Advice Association warning a ban may not lead to higher quality pension transfer advice. 

Ms Gupta also took the opportunity yesterday to clarify the regulator's position on professional indemnity insurance in the advice market, admitting it was an issue which was "very, very live" in the sector. 

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