The FSA may face a European battle to ensure it can ban all advisers from receiving commission.
Last week, Money Marketing revealed that a leaked draft Mifid II document suggests Europe is moving towards a ban on commission for independent advice but not for other forms of advice.
If this is adopted in final legislation, the FSA would need to secure an exemption from Mifid to extend the commission ban to all advisers under the RDR.
Lansons public affairs and regulatory consulting director Richard Hobbs (pictured) says the EC is increasingly pushing for directives on a maximum-harmonisation basis, meaning the UK would not be able to set its own national provisions. But Hobbs adds: “The UK will negotiate to complete the commission ban and that seems to me the more likely outcome because the momentum is heading in that direction.”
Cicero Consulting analyst Tim Gieles says the UK is not the only country pushing for a commission ban across the advice market. He says: “The Netherlands is seeking to introduce a total ban on commission for distributors for both advised and execution-only sales. It seems the UK will not be alone in looking to extend the proposed ban to avoid an uneven playing field.”
Zurich UK Life principal of government and industry affairs Matthew Connell says while the FSA may secure the European Commission’s backing on a request to keep the RDR intact, it may struggle to attract support from the European Council of Ministers.
The EC, which is responsible for proposing rules and shaping the debate, is the first stage in the process and is followed by negotiation at the Council of Ministers.
Connell says: “What the EC wants and what goes through horse trading at council level is sometimes different. At council level, it might be more difficult for the FSA, given that the UK market, with its large IFA presence in the mass market, is not duplicated across Europe.
“Within Europe, there are markets where bancassurers are a much bigger force. With different countries introducing different amendments at council level to back up the model that suits them, the FSA may find itself facing quite a big challenge.”
Aifa director general Stephen Gay (pictured) says: “Aifa has made clear the need for a level playing field for all advisers”. He says the FSA must continue to push for this principle in Europe.
An FSA spokeswoman says: “Our belief is that the general direction of Mifid II is in line with the RDR, but we will obviously continue to work closely with Europe on this.”
Highclere Financial Services partner Alan Lakey says: “I have got my doubts about whether the FSA will win on this. It could find itself bound by European rules.”