Advisers will be free to take out commercial loans from product providers post-RDR despite the FSA imposing a ban on factoring in order to stamp out provider bias.
Writing in this week’s Money Marketing, FSA director of conduct policy Sheila Nicoll (pictured) also confirms that advisers will be allowed to continue to get existing trail commission post-2012 when a firm is sold or joins or leaves a network.
Nicoll adds: “Like commission, factoring arrangements have the potential to create bias. Importantly, though, the new rules are not there to constrain adviser firms from seeking out credit on commercial terms. Advisers will remain free to take out loans from different firms, including banks, adviser networks and even product providers.”
Nicoll says any credit needs to be based on firms’ overall income rather than any income generated via a provider.
An FSA spokeswoman says it is not concerned that commercial loans will introduce a new form of bias. She says restrictions are already in place to prevent providers from offering loans at significantly better rates than they could get elsewhere.
Aifa policy director Andrew Strange says: “It does not seem to me to be a fundamental policy shift to get from a stage where product providers are able to lend intermediaries money on commercial terms to where if the industry got together and agr-eed what commercial terms were, with the blessing of the FSA and the OFT, that it could facilitate some form factoring.
“The reality is without factoring, the regular-premium market will really struggle.”