Advisers to bear reduced burden for pensions guidance
The Financial Conduct Authority (FCA) has proposed a significant reduction, from 30% to 12%, in the proportion of the costs of the Government’s pensions guidance to be paid by financial advisers.
One option, outlined by the regulator in its July 2014 consultation paper, was for financial advisers to pay 30% of the costs of the new guidance scheme. 28% would be paid by deposit takers, 19% by portfolio managers, 17% by insurance companies and 6% by investment managers. Another possible option saw firms in all five groups each meeting 20% of the cost.
The rationale for this proposal was that financial advisers were likely to benefit from the guidance scheme as pensioners receiving the rather basic guidance of Citizens Advice or The Pensions Advisory Service would then be keen to find out more and seek formal advice. But many within the advisory community questioned just how realistic this idea was, especially given that advisers charge advice fees, and the guidance can be accessed free of charge as many times as the customer wishes. An FCA spokesperson appeared to acknowledge this, by saying:
“We accept the point made by respondents that financial advisers will only benefit if, after using the guidance service, consumers seek advice from regulated financial advisers. We also accept it is clearer that product providers in the other fee blocks are more likely to benefit as the monies released through greater pension flexibility will be distributed amongst them.”
A new proposal now reveals plans for advisers to pay just 12% of the costs, while the other four groups will all pay 22%. Firms with annual income below £100,000 will not pay any of the costs.
The advisory community has given a generally lukewarm response to the revised proposal, with many suggesting that even 12% is too much to pay.
Chris Hannant, director general of the trade association, the Association of Professional Financial Advisers, described the reduction as “a big step forward,” but also commented:
“In our view this is not the end of the story. We believe this allocation still over-estimates the benefit advisers are likely to see as a result of the guidance service. We will therefore be making sure HM Treasury and the FCA monitor carefully how many people take up the guidance, and what they go on to do next. If the figures show regulated advisers are not benefiting from the guidance service, then we will be pressing the FCA for a further reduction in advisers’ share of the bill.”
Personal Finance Society chief executive Keith Richards made the case for advisers not to have to pay any of the costs of the guidance, in saying:
“Advisers should not pay any more than they currently do. The significant marketing budget enjoyed by the Money Advice Service should be redeployed to fund the guidance guarantee.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.