8. PRPG: Charging for Services

Question 1

What should you acknowledge with the client before charging for services? (3)

Answer 1

1. client clearly understands basis of the fees
2. how expenses will be treated
3. whether they will charge for initial meeting

Question 2

What are the possible fees for basis of charge? (4)

Answer 2

1. Time and expenses
2. Fixed fee
3. Contingent fee
4. Insurance

Question 3

Explain the time and expenses fee (3)

Answer 3

• based on time spent & resources deployed
• enhanced rate might be charged for urgent deadlines
• provision in letter of engagement (extra work = extra charge)

Question 4

Explain fixed fee

Answer 4

• fixed fee for agreed assignment (clear scope + proper costing)
• appropriate variation clause in letter of engagement (allowing additional work)

Question 5

Explain risks of contingent fee

Answer 5

Risk: third party questioning independence and objectivity of the member

Question 6

What fundamental principles does using a contingent fee expose? (2)

Answer 6

Integrity & objectivity

Question 7

What should member cecil be aware of for contingent fee? (3)

Answer 7

1. ensure that conduct meets & seen to meet fundamental PRINCIPLES
2. aware of LEGAL or regulatory restrictions
3. CLEAR scope of services in engagement letter & whether part or entire fee is to be repaid

Question 8

Explain insurance fee

Answer 8

Fees may be covered (whole/part) by professional fee insurance

Question 9

When is it necessary for a fully detailed fee note to be sent? (1)

Answer 9

Only if client requested!

BUT it should be member’s records available to prepare fee note if required at later date

Question 10

How to avoid fee disputes? (2)

Answer 10

1. agreeing fee before issuing fee note
2. giving indicative fees before work starts + keeping client informed regularly

(good practice to issue fee notes without undue delay)

Question 11

It is good practice to issue fee notes without undue delay

Answer 11

REMEMBER!!!

Question 12

What should you consider when charging costs or fees to different projects of the same client? (2)

Answer 12

1. allocation is commercially justifiable (reasonable)

2. allocation reflects work done for clients

Question 13

What does DOTAS stand for?

Answer 13

Disclosure of Tax Avoidance Schemes

Question 14

What must be disclosed to a client if a member is to receive commission for introducing that client to a financial adviser? (3)

Answer 14

1. Amount
2. Terms
3. Member’s relationship to third party (:S)

1.Amount, 2.Nature, 3.Identity of third party
is for when third party introduces client to you (Chapter 4)

Question 15

When should you (member) inform the client of commission being received from the third party?

Answer 15

As soon as appropriate but no later than when work starts.

Question 16

What should you inform the client if the commission from third party is unknown? (2)

Answer 16

1. Basis of how commission is calculated
   or
2. When commission is received

Question 17

If commission is received -

• important to preserve normal STANDARD of professional care and competence
• act in BEST INTEREST of client
• advice given should be JUSTIFIABLE by reasons other than receipt of commission

Answer 17

REMEMBER !!!

Question 18

Does the way in which commission is treated have to be detailed in engagement letter?

Answer 18

It is recommended that it is in engagement letter OR confirmed in writing

Question 19

What is a retainer agreement?

Answer 19

member may charge/accept fees from client simply for retention of member’s services

Question 20

What should be set out in writing of retainer arrangement? (3)

Answer 20

1. EXTENT of arrangement
2. LIMITATIONS of arrangement
3. the point at which FURTHER CHARGES may be levied

Question 21

What should a member consider before entering a retainer agreement? (2)

Answer 21

1. their ability to fulfil their obligations to other clients (other clients should not be neglected)
2. termination arrangement to be included in letter of engagement

Question 22

If payment is made in advance by client and work is not carried out, must it be repaid?

Answer 22

Yes. If substantial fees are paid in advance, make sure you have sufficient funds (including interest) to refund the client where necessary.

Question 23

Steps to take if client is slow to pay (which should be written in letter of engagement) (2/3)

Answer 23

1. seek to understand why they’ve not paid

2a. if no satisfactory explanation –>
- consider legal action

AND/OR

2b. - inform client they will cease to act unless payment received in reasonable & specified period

Question 24

Can you settle fees owed from money held?

Answer 24

no. UNLESS prior approval given by client in writing

Question 25

What act should member be aware of if you want client to pay in installments?

Answer 25

Consumer Credit Act 1974

Question 26

Steps for fee disputes (if client becomes dissatisfied) (3)

Answer 26

1. Discussion with client to settle differences 2. Consider whether matter could ESCALATE and RESULT IN CLAIM against them 3. Check with PII terms & conditions and consider need to report to their insurers

Question 27

Will CIOT or ATT arbitrate fee disputes between member & client?

Answer 27

No

Question 28

Before exercising a lien what should a member consider? (2)

Answer 28

1. whether appropriate steps have been taken to settle differences 2. whether to take specialist legal advice

Question 29

What is a lien?

Answer 29

a legal right to retain possession of a property until a financial claim that the holder of the property has against its owner has been met