The FCA has resisted calls from the Financial Services Consumer Panel to phase out referral payments to advisers from discretionary fund managers on pre-RDR business.
In a policy statement published today, the FCA confirmed DFM referral payments for pre-RDR business will be allowed to continue, and that post-RDR referral payments will be banned where the adviser has recommended the client should pay more into the DFM-held investments.
The proposals were outlined in a consultation paper in July 2013.
In today’s statement the FCA says four respondents to the consultation paper, including the FSCP, argued the regulator should go further and ban all referral payments – not just those for referrals to DFMs – or phase out DFM referrals for pre-RDR business over a transitional period.
The FSCP said in its submission that phasing out pre-RDR referrals would “adequately balance the interests of consumers and advisers”.
But the FCA says it has gone ahead with its proposed solution because it will have the lowest impact on firms’ business strategies.
The regulator also says a wider ban would require further consultation.
The rules banning new referral payments come into force on 31 December 2014.