RDR: FSA investigates platform incentives breach
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The FSA says it is currently looking into a potential breach of its incentives rules by a firm.
In its discussion paper, Platforms: Delivering the RDR, the FSA says that there is a risk that platforms will compete for business from adviser firms by offering incentives which do not comply with their inducements rule.
The FSA says: “Our thematic work on platform use identified a firm which had entered into a volume override arrangement. We are currently looking into this as a potential breach of our inducements rule.”
“Volume override” arrangements are where inducements are offered for delivering business volumes above a given threshold.
FSA head of investment policy Peter Smith describes it as where an extra margin of commission is paid out by a provider when a distributor sells a certain volume of products.
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Readers' comments (6)
Julian Stevens | 26 Mar 2010 2:57 pm
Tut, tut, I thought commission overrides had been all but outlawed years ago, if not explicitly then certainly implicitly. Just goes to show that there are still quite a few areas of less than wholly desirable practice with which the FSA needs to get to grips. Better late than never, I suppose.
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andy@globeifa.co.uk | 26 Mar 2010 2:59 pm
They are looking into Platforms, as you know. I fear that if we knowingly put a client on to a platfrom that is more expensive than another one, and if it turns out that we get a financial incentive for doing so, we could be in trouble.
We shall see!
JP
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Hugh Jeego | 26 Mar 2010 3:12 pm
Great, this is a Pandora`s box the FSA will wish they never opened.Any laws applied on this basis will have to apply to general insurance where the amount of business provided to institutions dictates the level of commission earned. Great news for small brokers everywhere!
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snooks | 26 Mar 2010 3:45 pm
In their purest form Platforms are just bits of technology. I fear the ones that act as providers rather than facilitators will be vulnerable to FSA attack, as will be the IFA users of such Platforms.
The FSA may eventually grasp that in using say, Nucleus, the IFA is not providing the client with a product but with a service through Nucleus as a facilitator.
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You must be joking | 26 Mar 2010 8:20 pm
Snooks - yes, lets all use Nucleus, it is tranparent, unbundled, not a provider etc etc etc... it is also MORE expensive for most funds than, say, SIS. Damn good idea - shaft clients to keep the FSA off your back...
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Snicks | 30 Mar 2010 2:01 pm
sorry i worked for a network who would not even look at product providers who would not agree to grease their palms at the outset of these platforms so this doesn't come as a suprise. when enough providers worked out this out we had to back down. It our fault as an industry for encouraging this behaviour. I would like to see who gets found out!
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