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FSA repeats provider influence concerns

The FSA has again raised concerns about product providers’ influence on advisers and the emergence of potential biases post-RDR.

In the FSA’s retail conduct risk outlook, published today, the regulator reiterated concerns it raised in last year’s outlook around provider influence, sales biases and ongoing services.

The FSA says providers could look to offer inducements to advisers in place of commission to attract business.

It says: “Some providers may seek to avoid the ban on commission by offering other incentives to advisers, such as business or consultancy services, although inducement rules should mitigate this. There is a risk that this may continue to bias the sales process.”

The regulator says it is also concerned a sales bias could emerge following the RDR.

It says: “While the RDR addresses potential commission bias, a sales bias is likely to persist in cases where the adviser charges fees contingent on a product sale or where charges are paid for ongoing advice regardless of whether or not products are sold.”

The FSA adds the requirement for advisers to provide an ongoing service to justify ongoing fees may incentivise firms to move to portfolio advice or discretionary management services and inappropriately make more transactions on an account than necessary.

It says: “This may increase costs for consumers or the risk of unsuitable advice.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Well now we have those real intelligent guys in Canary Wharf realising that the reason Banks and BS have a track record of mis selling is becaus of incentives and targets.Will it stop under RDR of course not.The top salesmen will still be made to achieve high returns and no doubt get their trips to Florida etc.What incentives do IFA’s get well we have to feed ourselves pay FSA fees and generally live. The FSA will make sure banks and bs survive regardles

  2. Here we go again – the start of RDR 2. FSA own survery found no commission bias but apperntly there was a perceived bias – Solution? Ban commission to get of any non existant bias. RDR says there is a risk of sales bias – RDR2 solution? – Ban sales!!!!!! “This may increase costs for the consumer…..” HELLO, are the FSA only really wakening up to this fact now? Who did they think was going to pick up the tab for RDR? The mass market wont be able to afford advice. Unbelievable, these moron’s are truly unbelievable.

  3. Dear FSA

    That is what RDR is creating you silly people.

    When you use a sledgehammer to crack a nut the chances are the nut will ricochet off your nose, smarts doesn’t it!

  4. When the FSA has finished we will have the perfect financial services industry for it is perfection the FSA want. It will look like this:
    No miss-selling
    No consumer detriment
    No fees
    No advisers
    No support staff
    No insurance companies
    No fund management groups

    Just banks…four bloody big fat banks.

  5. It seems to me that most of the FSAs current concerns are as a direct result of the regulatory environment that they have created. They are creating a rod for their own back, then using that same rod to beat us down

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