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FSA considers return of maximum commission

The FSA is investigating the possibility of introducing some form of maximum commission agreement as part of the retail distribution review.

The idea may be put forward as part of next week’s RDR interim report, alongside widely trailed measures to increase the separation between advice and sales.

Money Marketing understands that, as part of this separation, multi-tied advisers will no longer be able to call themselves advisers.

The FSA is still grappling with the concept of customer-agreed remuneration, with feedback from a number of providers suggesting practical difficulties in implementing such a system, especially for legacy products.

Some kind of maximum commission agreement could offer a new solution to the regulator’s dilemma on remuneration.

Beachcroft Regulatory Consulting managing director Richard Hobbs says: “I am an advocate of setting maximum commission but whether the FSA is surfacing the idea just to knock it back down again or whether they have decided that it is worthy of further reconsideration, I’m not sure.”

There was a maximum commission agreement in financial services before polarisation was introduced in 1988 as part of the Financial Services Act 1986. However, the MCA was later considered to be a constraint by the Office of Fair Trading and its reintroduction could fall foul of competition law.

CMS Cameron McKenna financial services partner Simon Morris says: “It should not be the FSA’s job to determine commercial terms and, if it did, it would be open to challenge from the European Commission.”

The FSA refused to comment on the issue.


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