News - The FSA is getting tough on advisers
David Severn is head of retail projects at the FSA and the man responsible for the new framework.
“We’re talking about a document that doesn’t just apply to independent financial advisers, it applies to any firm which is giving financial advice like banks or insurance companies.”
“What we’re trying to do here is to give the firm the opportunity to explain the services that it provides and also the consumer the cost of the advice” he added.
Breakdown of charges
Under Thursday’s proposals, consumers will be given a breakdown of charges when they first see an adviser.
This will make clear to the consumer the service being offered and the options they have for paying for it.
This could be through an up-front, hourly fee paid to the adviser or through commission on any products bought.
If the customer decides to go down the commission route they will also be shown the maximum rate of commission for that product and will also be the average commission charged for this type of product across the market so they can compare the two.
Helps consumers understand
The FSA hopes the table will help consumers understand the impact of paying for advice through commission, and encourage them to ask questions and shop around if the fees or commission charged by an adviser are above average.
In the past commission based advisers have been accused of just being salesmen but some advisers say that customers prefer a commission based system rather than paying a flat fee for a small premium product.
John Cobb from Trinity Wealth Management, is a fee based adviser and has his doubts about commission based products:
“If you’re working with a fee based adviser what you’ll pay is agreed before any work is carried out so both people know how much its going to cost.”
Thursday’s proposal is part of the FSA’s shake-up of the way financial products are sold.
The new rules could be in place later this year.
Originaly from Source