LIFE insurers are breaking strict rules banning the payment of commissions by offering incentives such as free holidays for advisers and their spouses, the City watchdog claimed yesterday.
Since the start of 2013 advisers have not been allowed to receive commission and individuals must instead pay up front for financial advice. The government hopes this will mean savers are always pointed towards the best possible product, rather than the one that offers the most generous inducements to advisers.
But the Financial Conduct Authority (FCA) said preliminary results of an investigation into the sector found some companies are still providing incentives, with some life insurers allegedly offering advisers support for back-office research and management services if they sell more products.
Two unnamed firms are now facing enforcement action as a result of alleged rule breaches.
The FCA said life insurers often sponsor expensive events for financial advisers – and suggested that the more business an adviser sends to an insurer, the more likely they are to receive an invite.
“Sometimes these events were in overseas locations and over a period of several days, and included the spouses or partners of the advisers,” said the FCA.
The ban on commission payments was a key part of the wider Retail Distribution Review (RDR).