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Competition Act warning on commission

Networks and national IFAs which use their financial muscle to gain better deals from life offices could fall foul of the new Competition Act, warn legal experts.

The higher rates of commission paid by providers to big networks and national firms compared with smaller IFAs could be open to challenge under the act, says specialist firm Compliance Consultants and lawyers Armstrong Neil.

City lawyers believe smaller IFAs may have grounds to sue providers under the act.

They believe common practices such as offering exclusive deals or best-advice panels could be uncompetitive under the act.

The experts claim big IFAs demanding and often getting higher rates of commission from a provider because it forms part of a panel could be seen as violating the spirit of the new law. This would be especially true if a smaller IFA firm could not get access to the same commission rates for selling the same product.

LIA spokesman John Ellis says that, while the act does not specifically spell out a situation where this might occur, it could be broadly interpreted to have implications for IFAs.

Armstrong Neil partner Gareth Fatchett says: “Within the act, networks and insurance companies could be affected because of exclusive deals and best-advice panels.”

Compliance Consultants managing director Simon Collins says: “It will not affect everyone but certainly it could affect bigger firms.”


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