The demise of factoring is likely to be the biggest problem for adviser firms once the Retail Distribution Review (RDR) is fully implemented, industry professionals argue.
At an Association of British Insurers' (ABI) conference in London, speakers agreed that factoring - where providers pay upfront fees to advisers and deduct them from the product over time - was unlikely to be viable from the end of 2012.
Section 4.13 of the RDR feedback statement says: "Product providers may, if they wish, offer facilities for customers to have their adviser firm's charges deducted from their investments, but from the end of 2012 providers would not be able to offer to finance advances to advisers from their own funds."
This would mean adviser firms not charging an up-front fee might only see a trickle of their fees paid over long periods of time, as they would not be entitled to receive a bulk payment.
Peter Jolly, head of distribution policy at Standard Life, says: "The removal of factoring will be the toughest thing for adviser firms to deal with in 2012."
Aegon's head of corporate affairs, Francis McGee, thinks the inability for providers to remunerate advisers in advance might be detrimental for consumers.
"If non-factored terms are not good for adviser firms then consumers who cannot pay upfront fees will probably have to go without advice," he adds.
Both agree the industry will need to work together to tackle the problems faced by consumers who cannot or will not pay up-front fees, or independent advice will only be available to wealthy individuals.
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
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