New Model Adviser - For Professional Investors

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

FSA warns networks and providers over 'boundary pushing' joint ventures

1 Comment
FSA warns networks and providers over 'boundary pushing' joint ventures

The Financial Services Authority (FSA) reiterated its concerns over distribution deals undermining the objectives of the retail distribution review (RDR), highlighting joint ventures between providers and networks.

Speaking at the Association of British Insurers conference, FSA head of investment policy David Geale said that the regulator wanted to ensure a level playing field where firms compete on the service they can provide clients, not on the basis of a deal they can get from a product provider.

Geale said: ‘There are some developments that are running counter to the spirit of what the RDR is trying to achieve or push the boundary a bit too far, for instance we’ve seen the emergence of substantial deals agreed between providers and networks which have raised concerns around the rules of inducements.’

Geale referred to the Dear CEO letter that the FSA issued in October which warned networks and providers not to work around the commission ban through distribution agreements and asked them for more information on current deals.

‘This may include also joint ventures between firms in the distribution chain, where the key intention of the joint venture seems to be to secure distribution,’ he said.

‘We have seen a number of such deals where participation in terms of financial contribution or shareholding, or indeed financial returns coming out of that joint venture, appears to be potentially one-sided.’

The FSA is looking into these arrangements and will take a view, he said.

Geale also said that the FSA would prefer to see ‘viable, financially robust adviser firms’ and it expects firms do achieve this on their own merits.

‘We do not want it to be achieved through subsidies, or backdoor commissions, or whatever you choose to call them.

‘Even well run firms make losses from time to time, there is no rule against that, but viable business models should be built on the transparency and the clarity the RDR provides.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Comment & analysis