14 Commonly asked questions We charge adviser fees on a percentage of funds invested basis. Is it compulsory for us to use a fee cap and fee collar to demonstrate that we offer fair value to our retail clients? The FCA believes that products or services would not represent fair value to a client if the benefits received aren’t reasonable relative to the price they pay. Remuneration must bear a reasonable relationship to the costs and workload involved in distributing a product however it is not compulsory for firms to have a fee cap and fee collar to demonstrate that they offer fair value to retail clients. Where a percentage basis of charging is being used you need to be careful about how it’s applied across your client segments. A universal structure for all client segments may be difficult to justify. Other options to consider include: • Using a tiered charging structure • Applying a different charging structure to segments of your client bank with different requirements and expectations • Setting a decency limit so that no client charge can exceed the limit irrespective of the amount of funds advised on/managed • Senior management sign off for fees under or over a certain level • Administration checks or file review checks which flag cases that have fees under or over a certain level for further scrutiny You should review your firm’s charging structure on a regular basis and have a documented rationale for your charging structure.
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