Adviser > Individual > Financial Adviser's Fee, our RDR-ready remuneration option
Financial Adviser's Fee, our RDR-ready remuneration option
Find out how our remuneration option is consistent with the Financial Services Authority's Adviser Charging proposals.
Adviser charging: RDR requirements
The FSA has proposed that advisers should only be paid for the advice and related services they provide through 'Adviser Charges'.
Adviser Charging: a brief summary of the proposals
- Adviser remuneration no longer determined by product provider – agreed by adviser and client
- Advisers banned from recommending products that automatically pay commission
- Adviser charges can be paid as a fee or deducted from investment if client agrees
- Any firm offering independent advice must operate on an Adviser Charging basis
- Advisers will not be able to receive commission and then rebate this to the client as a fee offset
- Proposals are due to come into effect from end of December 2012.
What does it mean to you?
You need to decide your own charging structure, reflecting the services you offer, and then apply this consistently to all clients. This should be provided to clients in a clear, concise disclosure document before advice is given.
How will this work?
- Charges must be set out in advance and agreed with clients
- They must not be influenced by the product or provider recommended
- Charges must reflect the cost of the services provided to the client, regardless of whether these Adviser Charges are paid directly by a client through a fee or deducted from the investment.
Ongoing charges
Ongoing charges should only be levied if a client is receiving an ongoing service, such as regular investment reviews.
The exception is where a client is making regular payments and is unable to pay for the advice at the outset and the charging structure is made clear to the client in advance.
Scottish Life's solution: Financial Adviser's Fee
Our own 'Adviser Charging' remuneration is called Financial Adviser's Fee (FAF)1. This offers:
- The transparency of a fee-based approach
- The tax-efficiency and practicality of both initial and ongoing commission payments from the product
- A clearer and fairer approach for you and your clients.
In depth
Download the following PDF guides for more information:
FAF was introduced in 2003 for our suite of individual pensions and has grown rapidly in popularity in the last few years. So much so, that 90% of all new individual business written in the past year has been on this basis.
With FAF, the cost of advice is agreed by you and your client and is then deducted directly from the client's plan at the outset for single payments and transfers and over the first 12 months for regular payments. This is in contrast to opaque, AMC based commission shapes where the cost is built into the ongoing product charges meaning the true cost of advice to the client is virtually impossible to quantify.
FAF is clearly labelled as an advice charge in client facing material and is disclosed separately from the product charges, i.e. a factory gate pricing model.
| Benefits for you
| Benefits for your clients
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Next steps
To find out more about Adviser Charging and our Financial Adviser's Fee:
- contact your usual Scottish Life consultant or account manager
- get an introduction onPension Portfolio, our flagship individual pension plan
- visit www.scottishlife.co.uk/rdr for the latest on RDR.
Source:
- For regular payments, FAF involves an extremely limited form of factoring in the first year.
For professional advisers only
