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FSA confident of securing commission ban for all advisers

The FSA is confident it will be able to impose an RDR ban on commission for all advisers, despite the latest draft of Mifid II focusing its commission ban only on independent advisers.

Money Marketing revealed in September that a leaked draft of the directive stated that independent advisers could not receive commission, with no mention made of other forms of advice. This was confirmed when the draft was  published last month.

In order to secure a commission ban for all advisers, as proposed under the RDR, the FSA will need to gold-plate the directive, if this area of the directive is implemented as suggested in the draft.

But speaking at a conference yesterday, FSA director of conduct policy Sheila Nicoll said she was confident the directive would allow the regulator to go further than the rules prescribed by Europe.

Nicoll said: “We are pleased to note the similarities between the Mifid II legislative proposals and some of our RDR requirements. And importantly, we believe that our RDR rules are compatible with the Mifid proposals.

“So, while the Mifid II proposals provide for a ban on commission when firms describe their advice as ‘independent’, the draft directive does not prohibit regulators from going further.”

Regulatory experts have already expressed concerns that as Europe pushes for directives to be implemented on a maximum harmonisation basis, the UK will be left unable to set its own national provisions.

The Treasury has already indicated that it will be lobbying for the wording of the directive to be extended to cover all advisers. The next stage of the negotiation process is at the European Council of Ministers. At this stage the UK will have to contend with other member states’ interests where advisers do not have such a strong presence in the retail mass market, although some states are proposing similar commission bans to the FSA.

Separately Nicoll also discussed the move to the new regulatory framework under the Financial Conduct Authority and the Prudential Regulation Authority.

She said a key issue for the FCA will be tailoring its regulatory approach for different parts of the market.

Nicoll said: “What is right for pure ‘retail’ markets is not appropriate for entirely ‘wholesale’ ones – another way of putting it, as Hector Sants did earlier in the year, is that a distinction can and needs to be made between ‘investor protection’ and ‘consumer protection’. The complexity in particular arises where, for example, products that start off in the wholesale market can and do find themselves in the retail market – recent developments in the Ucits market are a case in point.

“Getting this right will be a key challenge for the FCA, which needs wide debate since it underpins the success of London both as an international marketplace and as a mechanism for providing retail investors with access to a variety of financial products.”

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Comments

There are 31 comments at the moment, we would love to hear your opinion too.

  1. Self righteous prats!
    Once they get into a position of authority it goes to their head and they are believing what they say.
    How long before they include furniture, and other such potentially damaging products.
    Disney couldn’t make it up as well as they have.
    What a bunch of idiots,how have we let them get away with it?

  2. to Anonymous @ 5.46 well said

    Who said ” I wonder do the general public know what the FSA is doing on their behalf” basically they couldn’t give a toss it’s got nothing to do with the public its about kicking the s–t out of the IFA

    A bunch of bullies and cowards

  3. So let’s try and make some sense of what the lady is saying. Let’s take this statement
    ‘the FCA, which needs wide debate since it underpins the success of London ‘
    The FCA underpins the success of London does it. Well I’m not sure I have any interest in contributing to the success of London either professionally, politically or in any other way thanks. I knew that we were paying through our fees for the maintenance of a London based club of people on huge benefits to swan about in with grand ideas of themselves. What I didn’t realise was that one of them would start thinking they could tell us all that in a bare faced manner. Wow!
    The Vatican and the Arcbishop of Canterbury as part of their three pronged plea both ask that retail investors are no longer to be tied into to wholesale arrangements please. Clearly the lady worships at the temple of mamon (in London)

  4. I’m confident I will win the lottery………. but I haven’t spent other peoples money in anticipation of the event actually happening ! Ironic that not only is the FSA unaccountable to our Parliament they can also ignore Brussel’s as well.

  5. What really makes me laugh is the fact that other countries that to date do not have a strict regime and pay commissions,are to be told that the way to do it is the FSA way!!
    Is anybody willing to tell them?

  6. They like to gold plate everything, including their pensions.
    Maybe they could gold plate the longstop and make it 10 years or maybe we could have the same as the FSA, No Liability at all, even if we are recklessly stupid and grin like cheshire cats because we know we can do what we like and not even parliament can make us stop.

  7. “the man on the street” only will suffer. They will never pay for advice and are happy to buy solutions that pay commission to the seller. The result will be further strain on the social services system and will lead to higher taxes for all to make up for this. I am at a loss as to why MPs cannot see this (other than the fact they are only interested in re-election). The FSA has failed as a regulator – Northern Rock, Lehmans (they shared the same office as the FSA!) etc. Now they are about to fail the British public again.

  8. These self-opinionated idiots have no concept whatsoever of what goes on in the real world…A plague on all their houses…

  9. Rather than banning advisors earning commission, ban ALL product providers and fund managers from paying commission.

  10. Christopher Lean 2nd November 2011 at 7:44 pm

    I work on a fee basis, but the problem is that I can only deal with people on good salaries. I am grateful to have a niche market to go at.

    Normal people ( I include myself in this category) will struggle to pay fees and then pay a monthly premium to some investment/savings/protection product. Most IFAs, not all I must admit, work b++++dy long hours and provide a service that the banks don’t. The removal of choice of commission/fees is to the detriment of the adviser and the client.

    I fully support the need for Level 4 qualifications but there will be a huge section of middle England that will just not go for fee based advice. Result? No savings for retirement, no family protection, taxed estates etc etc.

    The IFA sector will survive, I am sure, but only the rich will benefit in the future.

    I am sorry, but this is not right or fair!

  11. A year back I asked the FSA directors whether they realised that they were despised by the majority of those they regulate.

    The answer was yes.

    Much like a dysfunctional family where a parent cannot understand the ways of his children and determines them to be “errant” as a means of substantiating his self-worth.

  12. Ironman Chris, come out of the closet or accusing the FSA of being cowards while not identifying yourself is a bit of a joke!
    Anyway, if Sheila Nicoll is so confident, instead of her putting our money where HER mouth is, perhaps she would like to put her own JOB where her mouth is and comment to going if she is wrong and with out a Golden Briault (sory I mean handshake/parachute)

  13. oh, come one! the vast majority of IFAs have been ripping the s**t out of their clients to make a big fat living for not very much work. Why shouldnt IFAs have to charge fees like any other professional occupation – or maybe its not that professional….

  14. Let’s hope the St Paul’s protestors can bring down capitalism first before the bankers get rid of IFAs…

  15. Is commission to be banned across the board? Is it to be banned for “non-advised sales”?

  16. If the change of name from commission to fee (client agreed remuneration) is made are we not then all liable to VAT once fee income goes above the VAT free limit?

    Is this not therefore putting the costs up again for the client? How does this possibly help the consumer. This will have to be factored in and planned for by the IFA who has traditionally offered a choice. With the choice removed clients will have their costs of advice increased.

    The danger here is that if the IFA doesn’t make an allowance his net profit will be much less. An IFA could see an additional 20%+ knocked off his profit…

    Am I wrong in this assumption?

    Non of the changes in this area of the RDR have ever been considered by me to be in the best interests of the consumer…

  17. Once again the political elite carry out a social experiment.

    In a few years time there will be a public enquiry into why huge swathes of the public aren’t receiving good financial advice and all that we will get from the FSA or whatever guise it is in at that point will be ‘whoops got it wrong again – never mind wasn’t our money that was wasted on this experiment’.

    PS Anonymous | 2 Nov 2011 9:46 pm do you have facts or are you believing the lies in the press?

  18. Mr G

    The rules on VAT remain unaltered by RDR. If advice predominates product intermediation then VAT is payable – doesn’t matter if payment is made by a fee or commission. If product intermediation predominates advice then the supply is exempt from VAT.

    This week HMRC have published updated guidance which states that if the intention at outset was to recommend a product then the supply was exempt. Let’s face it this is a good move – not for us though….we registered for VAT on 01/10/2011!!

  19. @anonymous (1 of ’em that is): “Rather than banning advisors earning commission, ban ALL product providers and fund managers from paying commission.” This seems a good idea. Why not start now with those IFAs who claim to be fee-based? Let’s see how many of them last to RDR eh?

  20. The lady is clearly as stupid as she looks.

  21. Anon 7:44 – May I congratulate you on a simple arguement which many, mainly the FSA, seem unable to grasp. For clients who have the ability to pay for a fee based service this facility already exists, for those who can’t we have commission. Being independent requires the advisor to give the client this choice. I fear to many are not giving clients this option and maybe this is where the FSA should be focusing their efforts. We have a system that works and the FSA seem determined to change it for the sake of change. The outcome will be 2-3 years of paralsyis until commission in all but name is reintroduced.

  22. O well, it will be so much better, when all this comes in, i will be updating all my compliance and business plans to show that as a company we without exception will invoice and charge plus vat in all cases, to anyone, trade company, regulator, who want to talk to us
    The insurance and assureance companies want our business, well they will have to buy it, the customers unfortunatly will have no choice, and any local or central govenment dept will be charged for all and any information requested and or required, all’s fair then
    Just one other thing i need to go to consultation for the next 4 yers to secure my job and cost the industry a fortune

  23. So what the FSA is saying basically is that it can do anything, absolutely ANYTHING it pleases if a relevant directive or piece of legislation doesn’t say explicitly that it can’t. A well known and deeply resented example ~ downright malicious persection in fact ~ is the denial to IFA’s of the protection in law of the 15 year longstop against stale complaints, because the FSMA 2000 didn’t say specifically that IFA’s SHOULD have it.

    By this line of reasoning, the FSA could claim legitimacy in stringing up IFA’s outside their offices on the grounds that there’s nothing written down anywhere that says it can’t.

  24. It will not be today, nor tomorrow, but it will happen – what?

    The influence of factory gate pricing – post the removal of commission.

    Ask yourself whether product providers are in the business of maximising profits, and if you conclude the answer is yes, then perhaps make the further assumption that they will use whatever legal means are at their disposal to do so.

    One such is to influence the amount of business they obtain by discriminating on the “factory gate price” which they offer to intermediaries.

    There are few industries where the “price” is not directly influenced by the volume purchased, and the higher the volume, the lower the net individual price obtained, and in consequence the better the offer that can be given to the eventual client.

    Perhaps the FSA think they are heralding in a brand new dawn with the removal of commission, but just give it time and watch the vagaries of commission replaced with those of factory gate prices.

  25. Yes we get the picture – the FSA will do whatever they wish, whenever they want. Is it any surprise that in spite of Hector’s ‘Be afraid…’ rantings, most of the financial services industry also does whatever it feels like doing?

  26. “By this line of reasoning, the FSA could claim legitimacy in stringing up IFA’s outside their offices on the grounds that there’s nothing written down anywhere that says it can’t”
    Julian, that is what most of us are afraid of..

  27. I joined the Financial Services industry in 1979 and we needed regulation, but what did we get?

    First we had FIMBRA (F***ing Idiots Making Brokers Really Angry).

    Then we had the PIA (Pain in Arse) followed by FSA (F***ing Stupid Association).

    All of them Village idiots who are clueless civil servants and have no idea about running an FS business.

    Why oh why did Al Qaeda choose the twin towers of New York in 2001? Why didn’t they choose the PIA/FSA offices instead-would have done the UK a massive favour!

    I left the FS Industry in the UK in 1998, because I could no longer put up with those morons. I now sell Offshore and it’s like the good old days prior to the Financial Services Act of 1986. I have handled millions of pounds of clients money and don’t need a “prat” to regulate me!

    Feel better now I’ve got that off my chest!

  28. The simple answer is to string them up first!

  29. So how come the same product providers will still be able to pay offshore Financial Advisors up to 7% commission plus 5% commission each time there is an “advised funnd switch”? Amazing how all these product providers seem to have an FSA approval number, ooooooooooohhh of course, they are not advising the public, they are merely paying offshore advisors who claim to advise the public.

    If hte FSA had any real teeth, they would have the force to control the product providers as well.

    Banning commission – absolutely right – but ban commission in all forms when ever a company or subsidiary company has any relationship with the FSA.

  30. Ther is nothign wrong with commission as long as the client is fully aware. This is a riduclous debate.

  31. Ancient Wisdom...is a IFA in N3 7th November 2011 at 12:08 pm

    I know alot of IFAS with huge mortgages and liefestyles of the rich and famous, brains of a goldfis. They earnt hundreds of thousands for simply siwtching or investing a lump sum and think that is fair reward for a few hours work.

    If you are a good IFA, do the work properly and care for your clients, they will pay a fee liekmine do.

    The reality is that many IFA’s and Networks will go bust after RDR – so quit whingeing on these posts, none of us can do anything so smell the coffee and pack your bags if its not for you – mine are being packed now, who needs these clowns running our industry and us putting up with it – not me.

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