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.”