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FCA clampdown on provider payments threatens nationals and networks
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by Jun Merrett on Sep 30, 2013 at 10:12
Nationals and networks could be dealt a crippling blow by the Financial Conduct Authority’s (FCA) crackdown on provider inducements to advisers.
Many of the nationals and networks have reported heavy losses for 2012, and rivals have warned the threat to distribution agreement payments could push a number to breaking point.
Earlier this month the FCA released the results of its review of provider payments to advisers. It reviewed 80 agreements struck between 26 life insurers and advisory firms, and found that more than half breached the objectives of the retail distribution review. That followed the regulator’s warning over such deals in a ‘Dear CEO’ letter sent to 24 providers and networks in October last year.
It said some payments by life insurers to advisory firms, such as funding for support services, were linked to securing sales of their products. The FCA also argued certain joint ventures, where a new investment proposition was jointly designed by providers and advisory firms, could create conflicts of interest and lead to biased advice.
Two firms now face enforcement as a result of the FCA’s review. Specialist annuity provider Partnership confirmed the FCA would be investigating a distribution agreement it had struck with an advisory firm.
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