Data collection: Firms must break down adviser charging revenue

(Updated) The FSA is proposing to add two new sections to the RMAR meaning firms must disclose adviser and consultancy charging revenue as well as data on client numbers and charging structures.

The regulator does not currently regularly collect disaggregated data on adviser remuneration.

But, in a consultation paper today, the regulator proposes adding 'Section K' to the RMAR, which will require all firms that provide advice on retail investment products to provide data on adviser aharging revenue, payment and client numbers, and charging structures.

A new 'Section L' will require all firms that provide services on GPPs to
provide data on consultancy charging and fees revenue, payment methods, employer client numbers and charging structures.

The changes will not come into force until 1 January 2013.

The FSA proposes to collect the breakdown of adviser charging revenue by:

• type of advice (independent or restricted);
• type of service (initial or ongoing advice); and
• payment mechanism (directly from clients, facilitated via product providers or facilitated via platforms).

The FSA is proposing to collect the number of initial adviser charge payments which, in combination with the revenue data, would allow the FSA to calculate average initial adviser charges.

This means the FSA would be able to "develop an understanding" of the influence (if any) that the type of advice and adviser charge payment mechanism have on adviser charges.

Under this proposal, a firm would be expected to record each time a retail client pays the whole initial adviser charge owing through a single payment. The total number of payments made in this way would then be recorded in the RMAR.

Meanwhile, the regulator is proposing to ask advisers for information on their adviser charging structures through the RMAR. This would include the minimum and maximum charges for initial and ongoing advice services, on an hourly and/or percentage of investment basis.

For example, if a firm has a range of adviser charges relating to different advice services, such as 0.25% of investment for a ‘basic' ongoing service and 0.75% for a ‘premium' ongoing service, it would include 0.25% as the minimum and 0.75% as the maximum under ongoing charges.

According to the regulator, 5,490 firms will be affected by the proposals, the vast majority of which are small businesses with one to three investment advisers.

Small-sized firms make up 4,005 of those that will be affected, 37% of the total.

Medium-sized firms, with between four and 18 investment advisers, comprise 1,271 of the affected businesses. A further 199 large firms, with 19 or more investment advisers, will also come under the rules.

In its March Policy Statement on the RDR, the FSA said collecting data would be "an important part" of its supervisory approach in the future.