Regulation  

Partnership probed for RDR rules breach

In a statement issued on 20 September, Partnership said it had been informed of the investigation just two days after the FCA published its damning review into inducements made from life companies to advisory firms.

It is understood that the FCA’s decision to scrutinise the arrangement with an unnamed advisory firm was met with “surprise and frustration” by Partnership.

The company, which recently floated on the London Stock Exchange, stated that it had taken independent legal advice on all agreements to ensure they complied with the RDR rules, and that it would “co-operate fully” with the investigation.

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In the 18-page GC13/5 guidance consultation, the FCA said that more than half of life companies could have “undermined” the objectives of the RDR in their service and distribution agreements with advisory firms.

Nick Poyntz-Wright, director of long-term savings and pensions for the regulator, said most companies were struggling to even identify a conflict of interest in their practices.

He said: “The reason why we only referred two firms for enforcement action was because these were at the worst end of the spectrum of practices we saw.

“We believe its better to have a dialogue with companies, many of which are now responding and developing policies that are more in line with the direction we want to see.

“This is about a mindset and a culture. We decided to issue guidance to provide a degree of clarity, but inevitably we are not able to answer every question about what is and is not appropriate.”

Chris Hannant, director-general of the Association of Professional Financial Advisers, said the FCA had responded to “some but not all” of its recommendations when asked to peruse an early draft of the review.

He added: “It is right that the FCA is trying to provide clarity, but it must provide further details to allow firms to make sound judgements. Companies must operate on a level playing field. There have been differences in interpretations and we need to do more to get better understanding of the rules, where two firms can look at guidelines and interpret them in the same way.”

Maggie Craig, director of financial conduct regulation at the ABI, agreed that more clarity was needed, “particularly around initiatives such as joint ventures”.

Key findings

• There has been a “significant increase” in spending for support services for advisory firms in the run-up to and following the RDR

• A significant proportion of support spending did not appear to offer a better outcome for customers

• The review found a range of payments made for hospitality, IT development and training that could contravene the RDR rules

• Some joint ventures may have been establish to secure distribution and could “inappropriately influence” advice

Adviser view

Robert Ward, business development manager of Gloucestershire-based Bank House Investment Management, said: “The problem is that many life companies are panicking because their businesses are not viable in a post-RDR world. There is no need to buy life insurance products directly from the provider. Advisers can use platforms at an agreed institutional rate and construct effective service propositions without them.”