Here's what our consultant Iain had to say about Recommendations & Client Categorisation... "One subject that has been nagging at me recently is the combined subject of platform recommendations and client propositions. So, your client proposition document states that for your highest category of client (for which increased fees are paid) the client’s assets will be placed on a platform, reviews will be conducted quarterly and re-balancing perhaps every six months. This means that, in some instances, the client is paying increased fees for being in the highest client category as well as additional platform fees. My question is this - what is the additional benefit to the client for being on the platform and is it appropriate for a firm to insist on a client going on to a platform to become a higher category client? If the firm’s job is being made easier by being the client holding their assets on the platform shouldn’t this mean that the client should be paying less on an annual basis? I am concerned that firms are using RDR and the requirement to categorise their clients as an opportunity to simply increase their charges for the same (if not less) work. I am aware of firms that are charging fees of 0.75% per annum and upwards when they are actually doing less work than they were previously because they are using a platform. Surely this can’t be in the spirit of treating customers fairly".

I took part in some training for the Macquarie towards the end of last week. The wrap has the functionality to enable varying levels of access rights for different groups within the organisation. When we consider that advising firms using a full wrap product can make changes to a client’s portfolio with impunity it is clear that there are risks here that need to be identified and managed. Surely it makes sense to limit access rights to this functionality to reduce this risk and to design procedures that can be tested and monitored.? Being able to switch client’s investments should be limited to staff members who have received appropriate training and a system of double checking (or using “four eyes”) should be implemented. The FSA state that firms should identify risks within their business and manage them appropriately. This sort of functionality (that has in the past been limited to providers and not IFA firms) could have potentially large implications for clients and IFA firms should make mention of this in their risk monitoring. Wrap providers will not undo any trades made on behalf of a client once these are placed so we can see that the liability for losses or capital gains crystallised if a mistake is made will fall squarely on the shoulders of the IFA firm. This subject has been included in the CATS Platform review structure and we strongly recommend you look at your own procedures to ensure you have adequate controls in place.

 

 

The purpose of the FSCS is to be able to provide compensation for an eligible complaint where unsuitable advice was given and the adviser can no longer meet their financial obligations. Whilst I agree  in the principle of what the FSCS is trying to achieve, to impose an additional levy on IFA firms of up to £10,000 during a time when they have to face the additional costs of training to meet RDR requirements, increased capital adequacy by the end of 2013 and increasing PI costs, seems a bit mean to me.  Many IFA firms are still trying to survive in this economic climate having already made cut backs and redundancies in some instances.  The money that the FSCS is requesting could be better spent on obtaining more compliance support and training to prevent advice failing happening in the future and therefore reliance on the FSCS in the future.