Regulators pressed to root out trail commission
The Treasury select committee has supported the FSA's stance on banning commission payments on financial advice after months of scrutinising the retail distribution review.
In its report on RDR, the committee said the introduction of fees could create a market price for advice.
It added that a fee-based model might lead to a reduction in the number of people who seek advice, but that it would also lead to consumers giving greater scrutiny to the advice they pay for.
The committee also said that although trail commission where advice is not offered is "difficult to justify", the FSA should measure the financial affect of its removal on IFA firms.
The committee agreed with the FSA that factoring should not be allowed as it would provide a potential bias in the market, and stressed that the FSA must ensure through annual reviews that banks adhere to the remuneration rules.
The report said: "Only with such transparency will the IFA community be persuadable that it has not been unfairly affected by the implementation of the RDR."
Many parties giving evidence to the committee warned that one of the consequences of the transition from commission to fee-based remuneration meant there had been a rise in the number of firms moving to place business to secure as much income as possible through trail commission.
To address this, the committee recommended that the FSA and its successor the Financial Conduct Authority "use all available tools" to find and prevent such practices.
Steven Cameron, head of regulatory strategy for Aegon, said: "We welcome the additional scrutiny the committee is recommending for vertically integrated firms. We also fully support the committee's recommendation for the FSA to scrutinise and report on market activity both to counter adverse incentives."