The FCA says it “remains concerned” that some advice firms are falling foul of its inducement rules.
In a speech yesterday at the FCA’s Mifid II conference, director of policy David Geale said firms may still be receiving benefits that have the potential to influence the advice they give.
Mifid II comes into force in January 2017 and will introduce a new inducements regime for firms providing independent advice or portfolio mamagement.
It will ban all payments from third parties, apart from certain “minor non-monetary benefits”.
Geale said while the measures should feel similar to the RDR rules, they will extend the regime to portfolio managers and “refocus the FCA’s attention on inducements more generally”.
He said: “Since the introduction of the RDR, we’ve maintained a supervisory focus on inducements.
“While we are encouraged by many advisory firms changing their practices to ensure their advice is not influenced by payments from product providers, we remain concerned that some firms may still be receiving benefits and payments that have the potential to bias the advice they provide – in other words, that their culture may have remained unchanged.”
Geale added: “For advisers, we will continue to focus on ensuring that firms are not incentivised to sell inappropriate products to their clients, while for other firms MiFID II is likely to prompt us to question whether the receipt of an inducement is genuinely designed to enhance the quality of the service to the end client.”
In September 2013, the FCA revealed two firms were facing enforcement action after a thematic review found that arrangements between providers and advice firms could undermine the RDR.
In October 2014 Partnership announced the FCA had discontinued its investigation into whether the provider struck a distribution deal with an advice firm which breached inducement rules.
Sesame was fined £1.6m by the FCA in October 2014 for setting up “pay to play” distribution deals.