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FCA to clampdown on hospitality for advisers

by Michelle Abrego on Jan 16, 2014 at 12:32

The FCA said that although the focus of its thematic work was on life insurers and advisory firms including networks, the rules covered circumstances when payments were made by providers to unregulated third party firms that were for the ultimate benefit of an advice firm.

On IT development and maintenance, the FCA set out examples where advice firms were breaching the rules by receiving payments, or other assistance from providers for developing software or other computer facilities that went beyond their needs.

It also said that firms could continue to receive hospitality, gifts and promotional competition prizes of ‘a reasonable value’ but any such payments should enhance the quality of the service provided to the client.

Where providers paid the market rate to firms for promotion, firms needed to demonstrate how this had been derived and why the revenue generated had not caused a conflict of interest, the FCA said.

It said: 'Advisory firms and providers should also consider whether ongoing promotional activity carried out in a given period could inhibit their ability to act in the best interests of clients.'

Candid Financial Advice's Justin Modray added: 'Corporate hospitality, ranging from lunches to exotic entertainment and trips, is rife and while advisers must keep a log of this it is not publicly disclosed. I would prefer advisers follow our lead and introduce a blanket ban on hospitality as this is the only sure fire way of ensuring it does not create bias.

'But at the very least such advisers should publish full records on their websites so that their clients can form their own opinions. We have never taken any hospitality or non client fee payments from product providers or any other supplier, an intention confirmed by an impartiality statement published on our website.'

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