10/11/2011 - FSA Confirms Client Cancellation Fee Refund For RDR

FSA Confirms Client Cancellation Fee Refund For RDRFSA Confirms Client Cancellation Fee Refund For RDR.

The Financial Services Authority (FSA) has issued new guidance on adviser charging, which will come into force with the retail distribution review, that clarifies the position for advisers taking the charge from products bought by the client.

It has detailed 2 ways in which product provider-facilitated adviser charging could work under the rules:
  • Where the adviser pays the full amount received from the client into the product and the provider deducts the adviser charge from it.
  • Where the provider deducts the adviser's initial charge before then investing the remainder in the product.
The FSA has also clarified how the incoming adviser charging rules affect clients' right to cancel investments. The refund to the client could be either net or gross of the adviser charge, subject to HM Revenue & Customs and Department for Work and Pensions (DWP) rules.
  • Where clients are not required to pay an adviser charge if they do not buy a product, and the provider had already paid the charge to the adviser, the refund could be made net and the customer would need to contact the adviser for a refund.
  • Where the provider has not yet paid the charge, the refund could be made gross or net.
However, the FSA's guidance would not apply to adviser charging on group personal pensions in an auto-enrolment scheme, which would come under DWP rules.


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