There have been a few developments recently which have put the spotlight on the relationship between the client and the adviser and, more specifically, ownership of the client between the provider and the adviser.
It’s always been a tricky subject to tackle given there are some in the industry who believe the ‘agency’ position between client, adviser and provider is distorted by the use of commission. But there may at last be some clarity emerging to clean up the status of advisers in this complex minefield.
There has been action by the Association of IFAs, for example, challenging Standard Life’s decision to suggest the advice given to clients by financial advisers could be wrong. And it seems an agreement has been reached which will see Standard Life withdraw a declaration form essentially asking clients to sign over decisions about their with-profits policy over to the provider firm without the adviser being informed of any changes - a situation which could have left the adviser with a potential mis-selling liability.
There were rumblings about SL’s move when the letters were first issued in December to suggest Standard was stepping into adviser territory with its vague suggestions of adviser mis-selling, so this agreement does go some way to shoring up the status of the IFA within the case management process.
But there are still some unresolved issues which challenge whether the adviser is acting on behalf of the client or the provider. Agency law is under scrutiny but the potential reforms on the table could finally make it quite clear where the adviser is advising the client, regardless of how they are remunerated, they are clearly acting for the client.
It would go a long way to helping the issues associated with Treating Customers Fairly, which were expected to set out when the customer was that of an adviser firm, when they were a customer of the provider, and who was responsible for different elements of either the investment or claims process.
Yet there is still this threat hanging over the image of the IFA market when it comes to how firms are remunerated, suggesting if the adviser is paid by an investment house or provider they can’t be seen as the representative of the client. There are firms who believe an adviser is not independent if they are in part remunerated by commission, but maybe Aegon has the answer to this question.
Its latest research suggests firms would be happy to see a flat rate of commission paid to advisers regardless of the products or work done because it would remove the suggestion of commission bias and would reinforce the adviser’s commitment to act solely for the client.
Of course, this level-playing field act would go against competition law and would therefore not be allowed under allowed by the Office of Fair Trading. But wouldn’t it solve all of this bickering and confusion about client ownership and representation?
There could still be competition between firms because they could choose to take less than the set commission payment for the advice given. And it would show advisers have always sought to act in the best interests, as most people in the IFA sector strive to do.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7034 2679 or email [email protected].IFAonline
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