FSA can’t stop us using mastertrust for commission - Lawson
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Product providers are set to ignore an FSA letter warning insurance companies against using trust-based arrangements to sidestep the Retail Distribution Review.
Last month Corporate Adviser reported that the FSA had sent a confidential letter to the ABI telling insurers that it would not tolerate them setting up trust-based schemes that paid commission to get round the prohibition on commissions expected from 2012 in the RDR. The FSA has refused to confirm the exact wording of the letter, but says it is monitoring the issue closely.
Standard Life head of policy John Lawson says the FSA’s words are hollow because it is completely powerless to stop providers from doing anything in the trust-based sector. The FSA has no jurisdiction over occupational schemes, which are governed by the Pensions Regulator.
The RDR will not apply to occupational schemes and some providers are looking at launching trust-based arrangements that allow commission to be paid to advisers. Trust-based schemes will also allow refund of employee contributions, with the employer keeping its contributions, when universal automatic enrolment is introduced from 2012. Contract-based schemes and personal accounts will not permit this.
Lawson says being free from FSA regulation means providers could reintroduce front end charging to facilitate commission payments.
Lawson says: “If the markets allow it, we will do it. They can’t tell us not to make products in this way. Just because we are regulated by the FSA does not mean we have to do what they say in unregulated areas. There is not a lot they can do about it if we do, unless they regulate occupational schemes.
The rules are the rules and if competitors operate in that market, we will too. Why would we not pay commission if it kept alive advisers who would otherwise go out of business?
Adam Richards-Gray, spokesman for the FSA says: “This is something we are keeping a close eye on. We are still analysing the responses to our consultations and working towards consulting on detailed rules by the end of the end of the year. As part of this process we are working closely with other agencies (TPR and the DWP) to identify the risks involved, and to make sure we are able to address issues of concern.”
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Readers' comments (5)
Steve Pett | 2 Nov 2009 3:49 pm
The FSA ambitions for God like powers combined with sheer ignorance are dangerous for everyone. It is nice to see some of the big boys are realising it too.
So sign up
http://petitions.number10.gov.uk/FSANOCONFIDENCE/
It will be too late soon!
Steve
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Anonymous | 2 Nov 2009 4:17 pm
The problem with the FSA is they have no salesmen to "sell" their ideas to us so they resort to dictating action in a free market economy where the largest distributors are independantly minded.
IF they'd been more sensible and brought advisers along with them by selling the idea of the RDR and RDIP, providers like Std Life would probably have followed the advisers.
Did any FSA member of staff ever do any sales courses? If they did they must have failed the exam! SPIT or SPIN. The FSA seem to have forgotten to show what is in it for US (or the consumer for that matter who this is supposed to be about). If they'd got enough of us on board, we'd have sold the idea of the RDR to consumers instead we're more likely to sell the idea to consumers that the F-pack is corrupt along with Nulabour......
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Anonymous | 2 Nov 2009 5:07 pm
Lets see more Insurers follow up this example!
I agree with raising standards and agree with current situation of offering a client a choice of fees or commision.
Fees only approach not only will drive some IFAs out of business but will also restrict independent advice to the more well off.
Why?
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Anonymous | 2 Nov 2009 5:51 pm
There may be trouble ahead,
But while there's music and moonlight,
And love and romance,
Let's face the music and dance.
Before the fiddlers have fled,
Before they ask us to pay the bill,
And while we still have that chance,
Let's face the music and dance.
Soon, we'll be without the moon,
Humming a different tune, and then,
There may be teardrops to shed,
So while there's music and moonlight,
And love and romance,
Let's face the music and dance.
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Anonymous | 2 Nov 2009 5:59 pm
"issues of concern"
What are they exactly and whatever they are do they also apply to banks and tied agents?
If not, is it anti-competitive? Does it create a cartel? Has the OFT been consulted?
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