How To Present Your Servicing Proposition

by Jeremy Allard, Quality Monitoring Officer

As the business practices of many IFAs continue to be affected by RDR, we felt it may be useful to provide guidance on how best to manage and probably more importantly document, the on-going servicing discussion.

Once you have provided a recommendation and agreed the initial charging for a new product or additional investment, discussion should next turn towards on-going servicing requirements. Does your client wish for an on-going servicing relationship with you?

As we all know, traditionally on-going ‘trail commission’ has been seen by many as part of the initial charging structure but the Retail Distribution Review is looking to tighten this area and ensure a service is provided if regular adviser charging is being made. This, for some, may result in a change to process and will need to include a clear documented discussion over servicing options.

Firstly, are you able to provide an on-going service? Of course, there is no obligation to do so but this will help with client retention and future income streams. It is also important to advise clients of the importance of regular reviews, even if you intend not to offer such a service. Secondly, does the client desire a service from you and, if so, what will it be and how much will it cost. Finally, how will it be paid for – direct fee or deduction from the product?

The process should be discussed in detail, and the various servicing options you are offering clearly recorded in your suitability report. This could be a set fee for a set service or, like many, you could offer a different scale of service dependant on client category based on an appropriate charging scale. One option to include should be ‘no servicing’. We believe this will provide a strong and robust record of the servicing discussion, and would allay potential client charging concerns if documented that the payment for an on-going service was not mandatory.

RDR is going to change the approach to ongoing charging and there will be much more responsibility on having an open and clear discussion with your client about what you can offer, how much it will cost and does the client want or need it – potentially an opportunity to add value and sell your servicing proposition.

In some cases we have seen servicing charges included as almost an automatic obligation, without details of client agreement or discussion, over what type of service is to be provided. As a Network , we will continue to try our hardest not to become involved in the level of charging being made, but we do intend to ensure under TCF that, where an ongoing service is being provided, the charging is both clear and transparent with the client fully aware of what they will receive in return.
jeremy.allard@financial.ltd.uk