Customer agreed remuneration (CAR) gives clients the final say on how much they pay for advice but some providers still put ‘decency limits' in place. Carmen Reichman finds out why.
The Retail Distribution Review (RDR) abolished the commission-based adviser charging model because it wanted to give consumers more clarity and control over how much they paid for advice. So far, so good.
But some providers and platforms, such as Skandia, Transact and Axa Elevate, have introduced so-called decency limits - a measure which puts a maximum amount on what an adviser can charge their client if they want to invest via the platforms.
Charges exceeding, say, 5% would be flagged up by the system and investigated by the provider.
Advisers are split on the issue, with some arguing providers should have limits and monitors in place as part of their duty of care, others think caps on adviser charging should have been abolished with commission.
Jacksons Wealth Management managing director Pete Matthew (pictured) said it was not the provider's place to adjudicate charges. "Customer agreed remuneration (CAR) - the clue's in the name.
"If the customer agrees to a particular payment, the provider should facilitate it. The provider is not there to police charging structures," he said.
He added that it may be beneficial for advisers to bundle their charges which can become a problem with decency limits.
The ultimate question
But Almary Green managing director Carl Lamb posed the ultimate question: "Sometimes how sure can you be that clients fully understand what they have agreed to?"
He argued that clients may not always be able to judge if a fee was excessive. Lamb added that the system needed a "check and balance".
Appleton certified financial planner Gerrard Kusal Ariyawansa said providers are right to ask advisers to justify high charges. "You should have to prove that your charges don't go against the spirit of the system," he said.
Ariyawansa has been questioned by platforms Transact and Elevate over charges put to some of his high-net worth clients. In one case he had charged a fee for the client's overall retirement plan and strategy when he was asked to justify it by the platform.
He said: "This was completely acceptable as part of their duty of care. Seeking clarification on a case by case basis has helped all three parties concerned."
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