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FCA 'disappointed' over provider payments to advisers

by Jun Merrett on Sep 18, 2013 at 12:02

FCA 'disappointed' over provider payments to advisers

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.’

16 comments so far. Why not have your say?


Sep 18, 2013 at 12:50

Who would have thought providers would look to take advantage of it?!

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Sir AA

Sep 18, 2013 at 12:55

Regrettably, these agreements have been in existence since the begining of time. Many large distrubutors i.e. Networks, Nationals and the likes have fed themselves on these araangeemnts for many years to the extent that they may not be viable business without these payments. I am however surprised that the regulator did not tackle this matter head-on in the built up to RDR rather that after the horses have bolted.

The world now eagerly awaits the name of the two firms that have gone to enforcement (I think most people can guess who they are with a high degree of accuacy without too much ado) and to see what sanction would be applied to them and to others for this abuse.

I think the regulator should be applauded on this occasion.

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Dan Rear

Sep 18, 2013 at 12:57

Storms and Teacups... Its a normal part of commercial life, such as goes on in all Retailing, eg Supermarkets, Car showrooms, Clothes shops. Why the heck can't the FCA get real? Oh, I know, 'cos they exist to find work for themselves and fill in their Empire.

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Incompetent regulators via mobile

Sep 18, 2013 at 13:01

I agree with Dan. FCA employees need to get a life.

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James Clancy

Sep 18, 2013 at 13:57

I note from the paper that one of the concerns the FCA have is in regards to inducements or entertainment.

That one should be easy to measure by basing the standards of entertainment or hospitality on what the Financial Conduct Authority permits.

Therefore, it will be useful if they could providers with a list of the restaurants they use, the typical wine spend per head .

Not to mention, if any employees accept hospitality to Rugby Matches, Chelsea Flower Show or Wimbledon provided by the consultants or suppliers they have relationships.

That would be an intresting document to request Citywire.

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Paul Barnard

Sep 18, 2013 at 13:57

I agree with Sir AA. As to the other two, you may well see yourselves in the same light as shop assistants, checkout operators and secondhand car salesmen - just the sort of rubbish the RDR should remove from the professional advice arena.

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Sir AA

Sep 18, 2013 at 14:26

Paul Barnard, many thanks for your kind words.

Regrettably, some of our compatriots don't appear to have a grasp of what the real issues are here and the impact on the image of the industry.

The culprits in question rant on emotionally about things rather than present rational and balanced arguments/discussions.

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Anthony Smith

Sep 18, 2013 at 16:58

The inducement rules have not changed much since Lautro days and these type of agreements and payments have always been in breach of the rules regardless of RDR. Over 10 years ago I was rejecting these agreements when compliance manager at Clerical Medical but somehow the industry slipped down a black whole and went mad leaving many networks totally dependent on hand outs that should never have been permitted under the rules.

Its not just about RDR but about firms influencing and directing business their way by handing out cash just to be on panels and keep up with the competition. This has never been allowed but somehow the industry just ignored the rules and got carried away. Why did it take so long to notice what was going on under their noses?

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Phil Castle

Sep 18, 2013 at 19:44

Bribery Act - end of.

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Bert Poppins via mobile

Sep 18, 2013 at 20:13

I don't think the bribery act delivers anything the FCA rules don't although it does create criminal offence as opposed to regulatory.

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Dan Rear

Sep 18, 2013 at 20:20

As I said earlier, its called capitalism. And don't think it doesn't happen in the so-called "Professions", course it does. Solicitors, Accountants, Doctors, Politicans (there's a thing...), its just life.

Anyway in the brave New World, inducements surely don't matter to IFAs, we get the same fees anyway.

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Sean Condon

Sep 18, 2013 at 22:05

Dan - Not sure if you read the accompanying article about what the FCA actual found as examples of unacceptable abuses but it does make you whince at what some firms out there are up to. Not sure I would just shrug it off as being part and parcel of 'capitalism' or use the old chestnut "a wrong isn't wrong if others are doing it." Surely we should be aiming a little higher than that on matters of integrity or ethics.

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Simon Kershaw

Sep 18, 2013 at 22:32

How does the FCA think professionals get paid?

Solicitors skim Legal Aid, accident claims, estate values, local search fees , remortgage proceeds, kickbacks from overpriced (and often useless ) barristers, etc.

Have you ever met a moderately well off solicitor who doesn't have a golden goose?

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Belmarsh Solitary

Sep 18, 2013 at 23:26

when you deform an industry by cutting off its distribution arms, do not pull a face at its grotesque attempts to feed itself

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Dan Rear

Sep 19, 2013 at 10:35

Sean, you're probably quite right, I was just a bit grumpy yestday. However it does irk me big-time when I see chaps like Nick P-W, who was booted out of his old job in the 'real world', start making work for himself, when much bigger problems exist - IMO.

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Sep 19, 2013 at 13:19

Here is an inducement. An IFA offering to take his "fee" off any Investment made....Not exactly what RDR had in mind.

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