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Partnership faces threat of FCA enforcement action

by Alex Steger on Sep 19, 2013 at 07:40

Partnership faces threat of FCA enforcement action

Enhanced annuity provider Partnership is facing the threat of enforcement action from the Financial Conduct Authority (FCA) over a suspected breach of rules around provider payments, according to the Financial Times.

Yesterday the regulator published the results of its review into inducements from providers to advisers which found that over half the 26 firms looked at had agreements in place which went against the objectives of the retail distribution review (RDR), with two firms set for enforcement action.

The FT said that Partnership neither confirmed or denied that it was one of the two firms and gave the paper the following statement:

‘As a matter of policy, we never comment on communications between ourselves and the Prudential Regulatory Authority or FCA.’

Fund group Henderson, which has joint ventures with networks Sesame and Intrinsic, told New Model Adviser® that it was not facing enforcement action and that none of its arrangements with adviser firms breached FCA rules.

A spokeswoman for Henderson said: ‘We cannot discuss commercially confidential matters, but we are satisfied our UK retail joint ventures meet both the regulations and the spirit of RDR. We can confirm that Henderson is neither in enforcement nor has it been referred to enforcement for this or any other matter.’

9 comments so far. Why not have your say?


Sep 19, 2013 at 08:23

I hope the extinct regulator pursues the real culprits in this "new" scandal.

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Robert Johnsey

Sep 19, 2013 at 09:28

Glad Partnership has been rumbled - in commission days they used to give Hargreaves Lansdowne about 4% when my minnow firm only got 1.5% - they said it was because HL placed much more business with them than we did - well they would - wouldn't they!

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Sep 19, 2013 at 09:41

@Robert - really? Partnership offered flexible commission payments for a number of years leading up to RDR allowing the adviser to take what they deemed appropriate.

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John Burchett

Sep 19, 2013 at 09:47

There needs to be a level playing field for everyone and we can but hope this is partly the motivation for this review.

The next review should be into the inducements that the FCA benefit from.

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Bert Poppins

Sep 19, 2013 at 10:51

If the cost to the client is no worse then why should manufacturers reward distributors accordingly? It makes no commercial sense for a manufacturer to pay a small shop the same as they would pay a supermarket for stocking their product - whether it is in discounts or in rebates. If the customer is paying the same in either it doesn't matter does it?

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Christopher Petrie

Sep 19, 2013 at 12:19

Bert, you do appear to have missed the whole point of RDR!

The cost of financial advice is now separate to the cost of a financial product, though one can be paid for via the other for convenience - if correctly disclosed.

This was to prevent product bias, and the rapid increase of tracker funds this year (as just one example) rather demonstrates that the old commission-paying structure DID have an effect on recommendations. As a second example, ask Aviva senior management, who will cheerfully explain how they managed in-flows of new business by upping or reducing commission levels, to suit their requirements at any given time.

However, the whole new system is undermined if product providers make "under the counter" commission payments (in the disguise of excessively funded seminars, annual dinners - some abroad! etc), to financial advisers; payments that are hidden from clients but demonstrably then have an effect on the recommendations made by those advisers to their clients.

It's important for the majority of advisers who try to play by the rules that the FCA stamps down on those who still refuse to accept the "new world" and try to cheat, in order to create unfair commercial advantage, at the cost of poorer advice for the end client.

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Bert Poppins

Sep 19, 2013 at 12:35

@ CP - perhaps my point was not transparent enough! What I was trying to say is that is unreasonable to expect a manufacturer to give the same commercial terms to a large distributor as it offers to smaller distributors. How the variances manifest themselves is the key point. Enhanced commissions, allocation rates or crude cash bungs are, quite rightly a thing of the past and against the rules, however we should not expect, or even want, a regulator to curb basic commercial by forcing manufacturers to treat their distribution channels exactly the same because it doesn't happen in any other world.

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alan mcintosh

Sep 19, 2013 at 13:10

Bert but it does apply in the FCA world, and shall continue to tighten in the spirit of RDR.

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Jonathan Kirby

Sep 19, 2013 at 13:42

One of the best things to come out of RDR as far as annuities are concerned is the ability to add in our fee (or not as the case may be) and thus get true comparisons without fear of being accused of bias, even where none existed.

As mentioned above, Partnership were ahead of the game when it came to advisor payments allowing a flexible commission to be incorporated which could reflect the true cost of the work long before RDR.

Whilst I accept that this could be abused, we have now moved to a system which opens up far more potential for fees abuse than the old if it's an annuity it's 1.3% max, or whatever.

Such is progress.

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