The Financial Services Authority (FSA) has proposed new guidance outlining how product providers can facilitate the payment of adviser and consultancy charges to intermediaries.
In CP 11/25, the FSA suggested two methods of facilitation, which is where a client pays their investment to the provider which then pays the adviser their share on the client's behalf.
The draft guidance said the following methods of facilitation are acceptable:
- Paying the full amount received from the customer into the product and then deducting the amount (or amounts) of the charge from it;
- Deducting the initial charge from the amount received from the customer and then paying the remainder into the investment product.
The guidance also sets out ways in which advisers can refund their charges to consumers who cancel their investment within the proper cooling-off period.
It said a provider may choose whether to refund the money net or gross of adviser charges as long as the client understood this at the point of purchase.
The regulator proposed the following methods of refunding charges are acceptable:
- Where the customer is not required to pay an adviser charge if they do not purchase a product and the provider has already paid the charge to the adviser, the refund can be made net and the customer would then need to contact the adviser for a refund.
- If the adviser charge has not yet been paid to the adviser, the refund could be made either gross or net, subject to any HMRC or DWP rules.
- Where a consultancy charge is facilitated through a group personal pension that is an auto-enrolment scheme, the DWP rules apply instead of the FSA cancellation rules. The DWP rules require refunds to be paid gross, so if a consultancy charge has already been paid to the adviser, the provider would need to seek a refund of the charges from the adviser.
- If an adviser charge for individual advice to a member of a GPP is being facilitated through the product, the refund to the customer on cancellation would also need to be paid gross. The provider would need to seek a refund of any charges already paid from the adviser, who would then need to contact the customer regarding payment of any outstanding adviser charge.
£1bn business since inception
Considered doing so in 2015
Client communication considerations
Aviva: ‘We are sorry’
FOI from Professional Adviser