While the “single biggest difficulty” to emerge from the RDR was the growing advice gap, the chief executive of the City regulator said he had concerns about the creeping reintroduction of commission to advisory firms by providers and said the regulator would publish guidance on inducements later this week.
Mr Wheatley said: “We are aware of cases where there have been deals struck between insurers and distributors with payments being made for IT or consultancy services which feels very much like trying to reintroduce some sort of commission bias.”
He added that the guidance paper would clarify what “we think has to exist for those sort of payments to be justifiable. They have to be fair, and to the ultimate benefit of the consumer”.
He said: “There is a part of the market that is no longer getting what they saw as advice in the past, and the concern is that the unmet demand is resulting in a lack of investment by people.”
Mr Wheatley added that he was not sure adviser charging was “as transparent as we would have wanted it to be”, and it was “a concern” that some providers did not facilitate adviser charging on legacy business. He also said that clarification was needed on restricted and independent advisory models and pledged to “redouble efforts” to educate advisers during in the next year.
Mr Wheatley rejected calls by the Association of Professional Financial Advisers to partly reimburse fees for firms which did not hold client money and had been categorised alongside firms which did.
He said: “Were we to reimburse a whole sector we would have to charge that somewhere else and as you can imagine that can get very messy.”
Apfa director general Chris Hannant said: “The most important thing is that the fee regime is corrected for 2014/15, and I can see that reimbursing firms would be complicated.
“However, I think it’s incumbent on the FCA to look at the viability of it because, as far as I am concerned, it is an error.”
| KEY POINTS |
In September the FCA announced that two insurance providers, one which was later confirmed as Partnership, were under investigation on whether one of its distribution agreements violated RDR rules. It followed the publication of a guidance consultation paper that revealed a significant increase in spending on support services for advisory firms in the run-up to and following RDR. An FCA spokesman confirmed that the investigation was ongoing. |
Adviser View
Peter Davies, founder of Cardiff-based advisory firm Create Wealth, said: “I’m aware of some providers which offer different terms depending on how much business you place on platform, which doesn't sit well with me. On adviser charging and the non-facilitation of it on legacy products; I think that providers and RDR have left clients stranded.”
