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15 June 2011

The City watchdog is planning to let clients stop paying a fee for an IFA's ongoing services even if they keep an investment recommended by the adviser. Tucked away on page 30 of the FSA's latest quarterly consultation paper are plans to allow a retail client to cancel an ongoing service for the provision of personal recommendations and related services without being required to withdraw his or her investments at the same time. Under the proposals outlined in the FSA's 123-page paper, this rule change would also apply to a member of a group personal pension who wished to cancel an ongoing service for individual advice, given under the Adviser Charging rules, about that GPP. The FSA proposes clients should be able to cancel the agreement for an IFA's ongoing services "without penalty." The City watchdog stated it planned to introduce this rule after trade associations asked it to make clear what would happen if a client no longer wished to pay an IFA for ongoing services. The regulator states: "Guidance to accompany this new requirement states that if a customer cancels the ongoing advice service, a firm should only require the customer to pay an amount that is in proportion to the extent of the service already provided by the firm, up to the date the ongoing advice service is cancelled. "If the firm also provides other services, such as fund management, it should make it clear to the customer that those charges will continue after the ongoing advice service has been cancelled." Firms have until 6 August to tell the FSA what they think about this change to the Adviser Charging rules. In its final rules for Adviser Charging, published in March 2010, the FSA stated if an ongoing charge applies for an ongoing service, the firm should clearly confirm the details of the ongoing service, its associated charges, and how the retail client can cancel the service and cease payment of the associated charges. Where an ongoing review service is offered, the FSA stated firms would need to establish and maintain appropriate systems and controls to ensure that their clients receive the ongoing services they have agreed to and are paying for. Where a client had cancelled an ongoing service, the FSA stated if the adviser firm later receives a payment for this service (for example, because there is some difficulty in stopping the payment from being deducted from the investment), it must refund the payment to the client. The FSA had warned firms would need to have appropriate systems and controls in place to deliver this. Published by FTAdviser

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