A consultation paper issued by the regulator today proposes new requirements which will allow the FSA to “collect data on adviser charging and consultancy charging revenue, payment methods
and client numbers, and charging structures, from all firms that provide advice on retail investment products”.
According to the FSA, the proposed changes to the Retail Mediation Activities Return rules will help monitor risks such as excessive adviser and product charging, the misrepresentation of advice status, and manipulation of the share of costs allocated to product charges and adviser charges by vertically integrated firms.
It added that adviser charging data would aid its ability to assess the outcomes of the RDR and the attendant new requirements for adviser and consultancy charging.
Proposed collection of data on adviser charging will be broken down into three categories: type of advice (independent or restricted); type of service (initial or ongoing); and payment mechanism (direct from client, via product providers or via platforms). The FSA is also proposing to collect data on client numbers, minimum and maximum charges and a variety of pension-based charges.
The total industry costs of the changes to the RMAR will be £6m in one-off charges and £2.6m in annual ongoing costs, according to the FSA’s cost-benefit analysis.
Complaint data
On complaints, which the FSA said it would not use as an absolute measure “but rather as one of several risk indicators”, the regulator proposes existing firm-level complaints be broken down to an individual adviser level but says it does “not intend to publish” such data. It says the total costs of compliance regarding these proposals amounts to £700,000 in one-off costs and £300,000 in annual ongoing costs.
Andrew Strange, director of policy at the Association of Independent Financial Advisers, said the organisation has "real concerns" over both the cost and time implications for advisory firms, and questioned the potential end result that such proposals would produce.
"The proposals […] move FSA alarmingly close to economic regulation. An assessment of service based on price can be dressed up as ensuring value, but is simply price regulation," Strange said..
The consultation paper did, however, note that “now is not the right time to introduce an additional set of requirements for transactional data” given the challenges the industry faces. The FSA has previously spoken of extending the range of transactional data it collects via product sales data.
The consultation period ends on 8 July, with the FSA planning to make a policy statement in the second half of 2011. Any new rules would come into force on 31 December 2012.
