Scottish Life
A shared Approach
Adviser & Consultancy Charging Options
Presented by
Fiona Tait ACII FSFA I Business Development Manager
Agenda
 What is AC/CC
 Provider influence
 Legacy Issues
Definitions
The charge for the service can either
be paid in the form of a deduction
from the client’s investment or
separately (e.g. by cheque)
We are not prescribing the basis on
which you charge for your services….
… but we do expect you to set and
operate your own structures
responsibly
Charges should reflect the service
being provided, rather than the
particular provider or product being
recommended
Source: FSA Factsheet SFDFS056 05/11
In practice
Adviser decides
Provider decides
how much to
charge client for
their services
amount of AC/CC
that their product
can support
Product
Commercial decision
Commercial decision
Client decides:
 whether to accept
adviser’s terms
 where it comes from
Personal decision
Fee Charging
Adviser Charging
Explicit cost agreed with
client at outset
Explicit cost agreed with
client at outset
Adviser can receive full
amount up front
May have to be paid over
time (regular contributions)
Client pays out of
taxable income
Net cost reduced by tax relief
on pension conts
Full 5% tax-deferred
income available (bonds)
Included in 5% tax-deferred
income (bonds)
Client writes a cheque!
No need for client to make
explicit payment
Cashflow planning
 Payment options (1)
Note - this is subject to provider agreeing to offer these terms
Cashflow planning
 Payment options (2)
Note – this is subject to provider agreeing to offer these terms
Adviser Charging
Consultancy Charging
Explicit cost agreed with
client at outset
Explicit cost agreed with
employer at outset
Can cover
initial set up costs
plus
ongoing services
if provided
Can cover
initial set up costs
plus
ongoing services
if provided
Only 1 client to consider
Costs will be spread across
scheme membership
Legacy issues
for pre-RDR plans
No legacy issues
for pre-RDR schemes
Some clients may by charged both!
A Shared approach to AC and CC

High level principles

Starting and stopping AC/CC

Changes to adviser firm
Generic principles
Source: A Shared Approach to Adviser and Consultancy Charging Jan 2012
Product design

Providers will not police “decency limits”

We cannot tell you how much you should
charge

We will however limit the AC/CC that can be
paid from our products

This is a commercial decision

You can, if you think it is fair, negotiate an
additional fee with the client

The maximum AC/CC due is to cover work
done, it is not a default amount!!!
Menu of Services
VAT-able
VAT-able
VAT-able
VAT-able?
1. Fact find
Gather information about the customer
(fact-find).
2. Research
Carry out research to find suitable
investment options
3. Report
Provide the customer with reports,
financial health-checks, forecasts
VAT exempt
VAT-able
“Intermediation gateway”
4. Recommendation
Recommend specific investment products
to the customer, including the prices at
which these can be arranged
5. Intermediation
Act between the product provider and the
customer with a view to arranging the sale
of the Retail Investment Products agreed
with the customer
6. Ongoing reviews
And, where applicable, i.e. where the customer
agrees to an ongoing review service, monitor the
customer’s ongoing position to ensure that the
products continue to meet the requirements of
the customer.
Source: ILAG revised HMRC guidance on VAT post RDR
Legacy issues – individual policies

What are legacy assets

When must AC be used

When can commission
continue
Which means that
Pre-RDR policies will
incorporate two
separate charging
structures
Ongoing commission
Ongoing
contributions
1 Jan 2013
AC
Increment
Trail commission
Premium level £
 Increments
Timeline
Post-RDR payments
Payments which are
made as the result of
advice given post-RDR
must be remunerated
via Adviser Charging
Pre-RDR payments
Commission may
continue on payments
which are made as the
result of a pre-RDR
contract
Ongoing commission
Escalation
Trail commission
Premium level £
 Contractual changes
Ongoing
contributions
1 Jan 2013
Note - This also covers outstanding initial commission
Timeline
Which means that
Portfolios which include
automatic rebalancing
at outset can continue
to pay ongoing
commission
Commission may
continue on payments
which are made as the
result of changes which
are part of a pre-RDR
contract
Which means that
If directly-held
investments are
switched future
payments must be
made via AC
Ongoing commission
 Fund switches
Life Policies:
Fund
switch
1 Jan 2013
Source: FSA Handbook – glossary entry “life policy”
Trail commission
Premium level £
3 (1) a long term insurance
contract; and
(a) A long term care
insurance policy
(b) A pension policy
Timeline
Fund switches within
life policies do not
create any new
payments and renewal
commission may
continue to be paid
Ongoing commission
Which means that
You will be
remunerated for work
done for new clients
 Change of adviser
AC
Increment
RCRCnot
re-registered
reregistered
1 Jan 2013
Trail commission
Premium level £
Any new payments
must be remunerated
using Adviser charging
Timeline
Or it may be reregistered, with the
client’s agreement, to
the new adviser firm
Trail commission may
continue to be paid to
the original adviser
Summary
 Post-RDR new payments
must be paid via AC/CC
 Charging should be
related to the services
provided
 Existing commission
can continue on preRDR contracts
Scottish Life
5 star service
Tried and tested administration
The ultimate default fund
3 year anniversary of Governed Portfolios
Group Pension Provider of the year
Co-branded support material
Individual Pension Provider of the year
Pay-as-you go options for drawdown and self-investment
Game on 2012
An evening with Ian Robertson & special guests - 19
Important information
The information provided is based on our current understanding of the
relevant legislation and regulation and may be subject to alteration as a
result of changes in legislation and practice as well as the circumstances of
the individual.
The figures shown in any case studies are examples only, and while they
highlight some of the opportunities for planning, it should be recognised
that they are not an exhaustive description of the opportunities or pitfalls.
Scottish Life, St Andrew House, 1 Thistle Street, Edinburgh, EH2 1DG. Scottish Life is a division of Royal London
and markets products produced by Royal London. Royal London consists of The Royal London Mutual Insurance Society
Limited and its subsidiaries. The Royal London Mutual Insurance Society Limited provides life and pension products,
is a member of the Association of British Insurers and the Association of Financial Mutuals and is authorised and
regulated by the Financial Services Authority, registration number 117672. Royal London Marketing Limited acts
as an insurance intermediary for other providers of general insurance and other life assurance products and is authorised
and regulated by the Financial Services Authority, registration number 302391. RL Corporate Pension Services Limited
provides pension services and is authorised and regulated by the Financial Services Authority, registration number 460304.
(37PR0497)
Game on 2012
An evening with Ian Robertson & special guests - 20