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FSA will allow factoring for network members

The FSA says it will allow networks to offer members a factoring service as long as it is available to all advisers for all long-term savings and retirement products.

The clarification comes after Sesame voiced concerns to Money Marketing that the FSA’s final RDR rules appeared to ban product providers and networks from offering a factoring service, which was a surprise turn as the regulator had not previously expressed concern over adviser-led services.

The FSA’s RDR policy statement, published last month, states: “We have gone ahead with the ban on factoring and made clear in our rules that it applies to both product providers and advisers.”

This statement appeared to have put paid to plans by Sesame and other networks to launch their own factoring services in light of the FSA’s intention to ban provider factoring.

Last September, Sesame said it would offer its advisers a form of factoring if the FSA refuses to allow up-front payments from providers.

The FSA has now clarified its position. A spokeswoman told Money Marketing: “If it is a payment mechanism available to all members for all long-term savings and retirement products, the FSA would allow it.”

Sesame Bankhall chief operating officer Stephen Young says this means that the network can go ahead and develop a service but he criticises the unclear wording of the FSA’s policy statement.

He says: “If you look at the wording in the policy statement, it seems to be very definite in saying that the rules also apply to advisers, so, as a network, it see-med that we would be prevented from offering a service.

But he adds: “If the FSA are confirming that networks can in fact offer a factoring service to members, then we will defin-itely develop an offering.”

SimplyBiz chairman Ken Davy, who also vowed to offer an in-house factoring service in the event of a provider ban, says he still intends to do so.

He says: “We are still looking at what we can do to offer an effective solution for IFAs.”

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Comments

There are 14 comments at the moment, we would love to hear your opinion too.

  1. As ever total clarity from our illustrious leaders – they must make this stuff up as they go along. Last week I personally asked a senior FSA RDR manager whether he could yet say what illustrations would look likr in our brave new world – post RDR. He hadn’t got a clue. What hope the IT depts of the major providers.

  2. Incompetent Regulators Awards Team 28th April 2010 at 3:55 pm

    So there we have it, the networks have more control of their businesses than the real independent independent. Networks have gone along with the FSA and influence AIFA. Hence the real IFA has no voice at all. Say no more everyone looking after themselves.

  3. Steven Farrall (Adviser Alliance) 28th April 2010 at 3:59 pm

    It just gets worse and worse. It is quite beyond any bureaucracy to design down to the minutest details how free individuals should interact commercially. There are just too many variables, which both as to quantum and type, second by second. By the time the FSA has thought of something human action by millions of market participants has thought of something else and the world moves on. The only way the FSA can implement these mad schemes is by a form of nationalisation by regulation. Or as I prefer to call latent totalitarianism. The last time that was tried we ended up in a world war, 80m people died and everybody ended up bust.

    This out of control quango really must be killed off, and pronto.

  4. Blimey. Sesame doing something useful for a change.

    That said, i suspect that the factoring will come at a cost to the member firm as its effectively a loan against future income.

    It would be better to allow the product providers to offer factoring as long as its for an exact amount to match the fee. No more, no less.

  5. Well, given that, as a network ‘member’ an adviser is effectively, at least in the FSAs view, an ’employee’, why would the ’employer’ not be permitted to advance money in this way, if they’re daft enough to want to do so.

    As to why an adviser would want to compromise his or her status in this way, I really don’t understand.

    I also fail to understand why a business would want be further compromised by allowing such a potential debt to build up.

  6. Steven Farrall (Adviser Alliance) 28th April 2010 at 4:39 pm

    … and if you want to here how it is never government bureaucrats that achieve anything uselful go to

    http://www.youtube.com/watch?v=76frHHpoNFs&feature=related

  7. It’s a mad mad world…

  8. Tired of fiction?

    Then try some facts from the FSA.
    *********************
    Provider factoring will be banned but its still possible for any 3rd party to set up what is effectively a loan against future regular commission amounts – which is not quite the same as traditional factoring although I can see why its referred to as such.

    Obviously any potential conflicts would have to be managed eg we would not expect to see it differ between providers covered in respect of either availability or terms.
    ***********

    The networks making themselves look appealing, if you lined them all up in a beauty parade you wouldn’t find an ‘appealing’ one would you?

  9. So if you change the name from commission to factoring that OK! So that what this RDR has been about, a name change!

    Also this is a precursor to allowing the banks to do the same only it would not seem PC to announce that first because the cosy banking/regulatory relationship has now been “outed”.

  10. As a network member who gave up indemnity commission altogether eight or nine years ago (and I’ve never looked back), I have to say that I don’t understand what all the fuss is about. In addition to our trail, our non-indemnity commissions are what are keeping us afloat during these extremely quiet times for new business. In addition to the fact that if you’re prepared to take commission on non-indemnity, you actually get paid more over the full earnings period, you’re never at risk of suffering any clawbacks either.

    The FSA is keen to see advisers develop long term relationships with clients, based on the servicing and development of strategies to meet their needs, in preference merely to selling them products for an upfront lump of commission, as has been the status quo for rather too many years.

    On this particular point, I have to say I agree. If nothing else, relatively modest amounts of commission payable over a number of years look decidedly more professional than an upfront lump sum that may well be perceived to be disproportionate to the amount of work undertaken.

    And finally, making the transition from indemnity to non-indemnity really isn’t as tough as it might seem. Even though I was never able to persuade any of my consultants to make the transition, I personally experienced virtually no cashflow pain at all.

  11. What a joke. We all know that the regular premium market is all but dead. How will you factor a £100 pm pension contribution? £3x12x5=£180? take away the factors interest and what is left? Oh sorry, I forgot the trail – £30 pa by year 4.

    Dumb.

  12. Beholdent to the Network for monies….. never… 🙁 …. they are parasitical enough..

    Agree with Julian – non indemnity.. no worries there..

    ….be nice though if some of the providers could

    a) remember what non-indemnity is… and

    b) remember to offer discounted terms for indemnity…. (Pioneer.. 🙂 )

  13. Any third party can offer this facility.

  14. Evan’s last comment at 3.05 is correct re any third party can offer a factoring facility.
    As part of my RDR submission, I had suggested that to get away from ANY kind of bias, all factoring could perhaps be centralised using a system similar to the FSA uses itself for FSA fees with Premium Credit and charging a set interest rate.
    Bearing in mind so many networks are owned by providers (and I suspect the banks will be back in there again as someone else said and this is just the FSA breaking it gently by not mentioning the word “bank”), how will the consumer perceive this? This does look like just moving commission to a different bit of the food chain……
    Why am I NOT surprised.

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