Skandia sounds adviser charging warning

The divorcing of product and adviser charges must not result in higher overall costs for the consumer, warns Skandia.

The complete and overall cost to the consumer must be relayed in projections and key features documents, as well as details of the separate charges for the product and for the advice, it says.

However, Skandia says it welcomes the principle of adviser charging - a key feature of the RDR which seeks to remove the possibility of product and provider bias from the advice process - saying it will go "a long way" to improving consumer perception of the financial services industry.

It says a natural outcome of adviser charging will be that consumers will question how much they are paying for financial products when it becomes clear what the upfront charges are in monetary terms.

It also claims the onus for implementing adviser charging is not just on advisers but also on providers, who it says have a responsibility to design their products to ensure the new rules are easy for advisers to adopt.

However, it adds implementation may be difficult for some traditional life companies whose administration systems will only be able to handle the outdated product structures the RDR will eradicate.

“The principles of adviser charging are sound but the practicalities of how to implement the changes will not be straight forward for some product providers,” says Peter Mann, chief development officer at Skandia.

"I think it is important that the industry realises that the responsibility for ensuring adviser charging is implemented efficiently does not just lie with financial advisers.

"Product providers need to get their own systems in order and provide as much support to advisers as possible.

"This may require providers to deliver tools and educative material to help advisers compare their charging structures to the rest of the market and articulate them clearly to clients.”