Changes in Reporting of Adviser Charges

The Background

The FCA, in Policy Statement PS14/13, announced the streamlining of elements of the reporting requirements for firms providing personal recommendations to retail clients in relation to retail investment products. The statement swept up some minor changes to the reporting of product sales data (PSD).

In an earlier Consultation Paper (CP14/5), the FCA consulted on changes to data collected from regulated firms through the Retail Mediation Activities Return (RMAR) and the annual questionnaire for authorised professional firms (APFs). They also consulted on minor changes to the submission of PSD.

PS14/13 summarises the feedback received on the proposed changes to Section K of the RMAR and the PSD reporting requirements. In the main, the FCA is to proceed with the original proposals .

Changes to Adviser Charging Reporting

Following the introduction of the Retail Distribution Review (RDR), the FCA started collecting adviser charging data from investment advice firms. In 2013, firms started reporting this data for the first time. The FCA then received feedback and a number of technical queries.

Based on this feedback, the FCA consulted (CP14/5) on potentially introducing a number of changes to the adviser charging data collected through Section K of the RMAR. The proposals were designed to provide greater clarity around what firms should report and to ease the reporting obligations. The proposals included:

  • incorporating into Handbook an interim technical note first published in November 2013,
  • simplifying the field labels used and streamlining the data collection form to make it easier to complete,
  • reducing the reporting obligation by requiring Section K of the RMAR to be completed annually rather than every six months, and
  • allowing firms to complete Section K on either a cash or accruals accounting basis.

The FCA has decided to implement these proposals so the changes will take effect for data reported from 31 December 2014.

In terms of streamlining, it is the removal of the requirement to separately report whether adviser charges were facilitated by a product provider or platform service provider that is most helpful. The FCA concluded that the marginal benefits of collecting the breakdown detail were outweighed by the time and money saved by stopping. Accordingly, firms will only be required to report a breakdown of adviser charges by those paid (a) directly by client and (b) those facilitated by a product or platform service provider.

Changes to product sales data

Since October 2012, firms have been required to complete their PSD returns through GABRIEL. Firms do not need to submit a data report where no relevant sales have been made. In CP14/5, the FCA proposed to introduce a change to this rule so that firms would be required to submit a nil return in these circumstances. The change is to be implemented.

Changes to Consultancy Charges Reporting

CP14/5 included consultation on introducing changes to the consultancy charging data collected through Section L of the RMAR and the annual questionnaire for APFs. These changes involved removing the requirement for firms to report detailed consultancy charging data through Section L of the RMAR and modify the content of the annual questionnaire for APFs. The FCA decided to implement these proposals.

Other

PS14/13 is useful also in that it sets out some minor points of clarification concerning trail commissions, decimal points, reporting of hourly rates, proportions, and payments over time.

Complyport View

These changes will help in a small way. Many back office systems (originally based on commission collection platforms) have not managed to integrate well with the Section K reporting requirements. As advice firms and clients get used to paying fees, charges facilitated through products and platforms ought to wither on the vine – perhaps over the longer term. Many of the current difficulties are generated by the complexity of payment options.

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