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FCA 'disappointed' over provider payments to advisers
by Jun Merrett on Sep 18, 2013 at 12:02
The Financial Conduct Authority (FCA) has said it is disappointed by the number of deals between advisers and providers it has found which breach its rules and the objectives of the retail distribution review (RDR).
The FCA published the findings of its review into inducements between providers and advisory firms which revealed that out of the 26 firms it had looked into, over half had agreements in place which potentially breached its rules. The regulator also revealed two firms were currently face enforcement over their arrangement.
Nick Poyntz-Wright (pictured), FCA's long-term savings and pensions supervision director, said: 'It is disappointing news in terms of the finding. We engaged with 26 firms and looked at their distribution agreements and we found more than half of those firms were involved in agreements where we had issues.
'What triggered the work in the first place was we did work last year on how firms were getting ready for the RDR. Those findings suggested the agreements which have been around for many years had suddenly stepped up in value and size, so that was the potential flag.
'We then found a lot of cases that could cause potential conflict of interest and have potential adverse outcomes for the customer, that is disappointing. Is it surprising? We went in knowing there was a significant uplift but we might have expected firms to have been better at identifying where these conflicts could arise and be better at managing them.'
He said the FCA was in talks with firms and trade bodies including the Association of British Insurers and the Association of Professional Financial Advisers to generate industry support for its rules.
Poyntz-Wright said: 'We have been talking to firms and trade associations to try and generate a body of support to get behind this and recognise we need to see better practice for the future and if we can encourage the industry to move forward on that basis we have a better chance of success for the transparency and trust of the RDR.
'The difficulty with this is that it takes two, literally, with the agreements and there is also an element of competitive pressure which can make it difficult for firms to be first movers in changing their practice. That’s not a desirable situation so I think we’re looking to get a body of support, if there’s enough weight of opinion in the market it lessens the risk for the first mover to take the responsible step.’
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