The FCA has set out the kind of arrangements between providers and advisers it is concerned about following its thematic review into inducements.
In its guidance consultation, published last week, the regulator set out examples of agreements which could have breached FCA rules.
The FCA cited one advice firm that secured substantial payments from a number of life insurers for providing support services such as promoting their products and arranging training events. These insurers, and only these insurers, were chosen for the advice firm’s investment panel.
One insurer “significantly increased” its spending on support services offered by an advice firm with little justification of the business benefit or the amount paid. The terms of the agreement provided for a sizeable increase in services bought over the following years.
Another example related to a provider and advice firm who planned to set up a joint investment venture. Under the terms of the venture, the provider would have paid a substantial upfront payment to the advice firm, with the advice firm getting a greater share of the profits, which also increased with the level of business channelled to the joint venture.
The FCA questioned whether the advice firm could be considered as independent as a result of recommending funds it had a role in manufacturing, and prevented the venture from going ahead.
The regulator says any firms considering such joint ventures should discuss these plans with the FCA.