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EY: Inducements ‘can be difference between profit and loss’ for networks

Ernst & Young says the withdrawal of distribution deals between providers and advice firms will be “the difference between profit and loss” for some networks.

In its final guidance on inducements, published last month, the regulator sets out hospitality that is acceptable for advisers to receive. Firms have three months to make any necessary changes.

The original guidance in September found that over half of the 26 firms reviewed had agreements in place which could breach inducement rules. 

EY estimates that provider payments are worth around £30m a year, half of which could be banned.

EY financial services division director Malcolm Kerr says: “The sums involved are material. In some cases the payments would literally be the difference between profit and loss.

“It is one of the last vestiges of the old era and the last bit of the commission system that needs to be fixed.”

Lighthouse chief executive Malcolm Streatfield says the firm already complies with FCA rules. He says: “There have clearly been some abuses of the system. But if what the regulator has put out has the effect of limiting training, I can only see that as being detrimental.”

Tenet distribution and development director Helen Turner says the network is carrying out a detailed review to ensure any “minor amendments” to its events programme are included in the relevant documents. 

Last month, Sesame called off a series of protection roadshows while an overseas conference sponsored by major UK fund managers was cancelled following delegate concerns over inducements.

Verus Wealth co-director Paul Lothian says: “The problem is that the details of these deals have been hidden behind claims of commercial sensitivity. The new rules should force more accountability.”

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