Glossary · UK
What is Adviser Charging?
The FCA rule that financial advisers must be paid an explicit, agreed fee by the client for personal recommendations, rather than commission from product providers.
Full Definition
Adviser charging is the FCA regime, introduced as part of the Retail Distribution Review and effective from 31 December 2012, under which financial advisers giving personal recommendations on retail investment products must be paid an explicit fee agreed with and disclosed to the client, rather than receiving commission paid by the product provider out of the client's investment. The change was intended to remove the conflict of interest created by commission -- where an adviser might, consciously or not, be nudged towards recommending whichever product paid the highest commission -- and to make the true cost of advice transparent and comparable between firms. Advisers can structure their charges in different ways: an hourly rate, a fixed fee for a defined piece of work (such as a pension transfer report), or an ongoing percentage of assets under advice for continuing service, and firms must set out these charges clearly before work begins, typically in a client agreement or key features document. Adviser charging does not apply to pure protection products such as life insurance or income protection, where commission from the insurer is still permitted, which is one reason protection advice and investment advice are sometimes offered on different payment bases by the same firm.