Compliance issues for fee-based advisers

31 October 2004 was an important date for a number of reasons, most notably the start of the regulation of mortgage intermediaries. A less-noticed aspect of the Mortgage Conduct of Business rules (MCOB) was the requirement, soon to take effect in the investment sector, for independent firms to offer clients the option of paying by fees. This recognition of the central nature of fee-paying to the notion of independence represents an important step in the development of this type of remuneration. However, when a regulator gives a positive message about a particular way to do business, one can be confident that related compliance issues will arrive shortly afterwards, says Adam Samuel.

Adam Samuel BA LLM MSFA MAQ, compliance and complaint handling consultant and trainer, can be contacted on tel 020 7586 1938; email AdamSamuel@aol.com, website www.adamsamuel.co.uk

The rules

Fees have been the subject of mild supervision since N2 and in effect since the dawn of conduct of business regulation in 1988. Firms have had to provide their customers with a terms of business since then; this has had to contain any provisions of the contract between the firm and the client. Consequently, an IFA who did some advice work for a client without using a fee agreement (due to the intimate nature of his relationship with the customer!) could not claim a fee from his client. The PIA expressed that view correctly to a network faced with a customer complaint on the subject.