THE Financial Services Authority yesterday warned the UK’s biggest financial advisers and providers not to try and “work around” incoming rules on commission payments after evidence showed firms could already be trying to circumvent them.
In a letter to the chief executives of 24 life insurers and financial advisers, the FSA said it was concerned firms would try to bypass the Retail Distribution Review (RDR) rules that start in January 2013.
The watchdog said it had evidence providers were trying to tempt distributors with “inducements” to get them to recommend their products to customers over rival providers, which will be banned under new rules.
Training conferences involving social and entertainment events, promotional payments to advisers from distributors and money paid to develop software for advisers were all tactics which could breach the RDR rules, the FSA warned.
RDR is set to end commission payments made from product providers to advisers and replace it with fees paid by customers for financial advice.
The letter, from the head of its life insurance office within the Conduct Business Unit, Nick Poyntz-Wright, said the watchdog was acting to ensure a level playing field among advisers and end the potential for biased advice.
“We are concerned that some firms may be looking for ways to circumvent the adviser charging rules by soliciting or providing payments that do not look like traditional commission, but are generally intended to achieve the same outcome,” he wrote. “Clearly such arrangements are not in the spirit of the RDR.”
The FSA also highlighted concerns over providers locking in advisers with lengthy contracts, such as for five years, before the new rules come into force.
It added large payments from providers could also be acting as a subsidy to advisers, which could distort competition between advisers in the market.