FCA warns firms to not engage in inducements

The City regulator published the guidance on inducements last week, singling out exclusive distribution arrangements and joint ventures between advisers and providers as areas that could create a conflict of interest and breach the RDR rules on paying commission.

The 18-page paper followed comments from FCA chief executive Martin Wheatley, who said he was concerned that some firms were circumventing rules on inducements by offering advisers other services, such as IT or consultancy assistance, which he felt was “very much like trying to reintroduce some sort of commission bias”.

It said firms were expected to review, and, if necessary, revise their existing arrangements in light of the guidance, and warned that both the provider and adviser could be liable for action if a payment was not compliant with principle eight of the conduct of business inducement rules.

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Key points:

• Payments made or received should always enhance the quality of the service provided to customers

• The inclusion of providers on a panel should not be influenced by the provider’s willingness and ability to purchase significant services from, or provide other benefits to, the advisory firm

• Service and distribution agreements should not be constructed so that they inappropriately influence personal recommendations made by advisory firms

Adviser view

Mike Pendergast, IFA for Cheshire-based Zen Financial Services, said: “I haven’t experienced any offers for these types of inducements from providers, apart from the usual service calls. Maybe they are targeting the larger firms, but it’s not something that has affected my business.”