Chris Budd, managing director of fee-based Ovation Finance Ltd, said a letter received from a life insurer showed the FSA’s Retail Distribution Review initiative meant he would be penalised financially if he gave advice.
In a Blog posted on The Adviser Lounge, Mr Budd revealed he received a letter from an insurer for a life assurance policy which was set up by a previous adviser on automatic indexation.
Included with the letter to the client was a form for the adviser to sign asking him to declare whether or not he has provided advice to the plan holder.
According to Mr Budd, the letter included the following statement: “If you do not return this form to us… we will assume that you have not given advice and we will pay any commission due.”
Mr Budd said: “If we had provided advice to the client, commission must cease. If we have not provided advice, commission may continue.
“As a consequence of the FSA’s RDR initiative, we are paid if we do not to give advice.
“As a result of the FSA’s RDR initiative, we will be penalised financially if we do give advice.
“It is small change, and won’t change how we do anything. But the concept, the idea. A regulatory setting up a system to financially motivate advisers to, at best, avoid talking to a client.
“No one set out for this to happen. The FSA are not actually trying to make things worse. They want to do the right thing, they want to protect customers and reduce costs. And yet their intervention has, in this instance, done exactly the opposite.”