Speaking at the Tax Incentivised Savings Association conference in London today, FSA director of conduct policy Sheila Nicoll warned advisers not to try to flout its retail distribution review reforms. She said it was disappointing that there are “still signs of denial or misplaced wishful thinking” that the proposals will go away.
She cautioned advisers that the FSA has clear advice that it can legally enforce a higher minimum standard of qualification.
She said the regulator can remove an adviser’s right to trade if they do not comply.
Nicoll said: “A word of caution for those who might think that they may successfully challenge our ability to raise qualification levels.
“I want to reiterate that our proposals are legal.
“We have the power to change our requirements if it is in the interests of protecting consumers, and we are entitled to remove an individual’s licence to trade if we deem them not to be competent.”
Nicoll also warned firms not to try and cash in via a closing-down sale on commissions.
She said the regulator has heard of firms trying to build up trail commission or take high up-front commissions before the new rules on adviser charging are enforced, but she said this kind of behaviour would be frowned upon, and the FSA would do thematic work in the run-up to 2012 to ensure that there was no consumer detriment resulting from it.
Nicoll said: “I want to pause to give a very clear warning to advisers who may be looking to flout our reforms or who may seek to maximise their own profit and rewards before our rule changes take effect, while not paying appropriate regard to the interests of their customers.
“We have heard that some firms, both providers and advisers, may see the period between now and implementation as an opportunity to build up business with trail commission to get round our proposals, or to suggest products in which they receive very high remuneration but which may not be the most appropriate for the consumer.
“We will take a very dim view of such detrimental behaviours and it is our intention to do some thematic work in the lead-up to the end of 2012 to make sure that consumers aren’t losing out.”
On alternative assessments, Nicoll said the regulator would continue to listen to proposals, but that alternatives must stand up to scrutiny.
She insisted that the RDR timescales are realistic. She said she was “concerned” about suggestions that the FSA might not have considered its EU obligations when putting together its RDR proposals, asserting that the regulator has been sure to keep Brussels informed and updated at every stage in the process.
Responding to concerns that reforms to adviser remuneration will exclude customers who cannot or will not pay a fee for advice, Nicoll said: “That is not our intention and we have said explicitly that charges can come out of the product.”
Nicoll also revealed that the FSA will be publishing another RDR paper next month, which will include a look at potential read-across of the proposals to pure protection and group personal pensions.