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Advisers say multi-ties will spark a rise in commission

IFAs are predicting a rise in commission under a multi-tie regime as product providers look to secure their market share amid confusion over the willingness of the FSA to intervene.

The prediction comes as the FSA says that it will monitor multi-tied firms and product providers for breaches of the overriding commission rules but it refuses to stipulate at what stage they could be violated.

The rules prevent product providers paying “undue” levels of commission to advisers but IFAs say they cannot remember the FSA using these powers.

IFAs believe that product providers will take advantage of the FSA&#39s apparent reluctance to enforce these rules by using commission as a means of attracting distribution through multi-tied advisers.

The rules will become redundant for IFAs as they will have to switch to a preset fee or commission rebate charging structure.

Consultation paper 121 says: “Providers will still have to have regard to the &#39overall requirements&#39 the regulatory regime places on them and decide whe-ther actions to win market share on the basis of commission payable are consistent with the requirements.”

IFAs say that it is unclear what the phrase “overall requirements” means but they believe it is doubtful that the FSA will crack down on commission levels unless the dash for distribution really heats up.

FSA spokeswoman Louise Buckley says: “The over-riding commission rules are flexible enough for us to go in when we feel it is appropriate.”

Informed Choice managing director IFA Nick Bamford says: “One of the consequences is that we will see levels of commission increase.

“But I do not think that we will see them increase to the extent that the FSA steps in and beats people up.”


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