The Financial Services Consumer Panel has called for a ban on commission payments to advisers but also warned that sales bias must be eradicated.
Speaking on the release of its annual report, FSCP chairman John Howard says it would be a tough decision for the regulator to take considering “the significant rump in the industry that will resist such a change”.
But Howard says this was a “vital opportunity” to change the face of retail financial services and avoid future misselling scandals.
He said the FSA must introduce regulations to move all advisers to a new system of paying for advice based on fees and eradicate commission payments, although he said the FSCP had not done further work on what that system would look like.
Howard says : “I cannot see that a new system could be introduced in piecemeal. It would require the whole industry to adopt it and it is likely that either the FSA or the Treasury will have to introduce rules to require all firms to move to a new system”.
As well as tackling commission, Howard says the FSA needed to look at the sales techniques of providers and banc assurers to ensure that sales bias is not leading consumers towards unsuitable products.
Howard also attacked the FSA’s decision to scrap the menu and initial disclosure document saying that in his view the research behind the decision was “deeply flawed”.
He said the FSA failed to qualify properly the consumer benefits of the documents and did not take account of the increase in consumer confidence that they created.