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MM leader: Another thorn in the FCA’s side over RDR ‘success’

“Product providers are paying significant sums of money to distributors as part of long-term distribution deals arranged ahead of the implementation of the RDR.”

That was how Money Marketing first revealed the extent of provider payments propping up the advice market back in 2011. Since then, we have consistently led the charge with a raft of exclusives on inducement deals, and closely followed developments as first the FSA and later the FCA tried to get a handle on the problem.

So it was surprising to hear the recent comments from FCA policy director David Geale that the regulator “remains concerned that some firms may still be receiving benefits and payments that have the potential to bias the advice they provide.” Surely these should have died a death in the wake of Sesame’s £16m pay to play deals?

Money Marketing understands that the renewed focus on inducements stems from a desire to ensure fund groups as well as pension providers are complying with the rules, with some in the industry suggesting asset management firms got off lightly in the first round of the FCA’s inducements crackdown.

Given that the FCA has just reviewed the payments received 
by a total of 23 networks and nationals, the regulator looks to have found sufficient evidence to reignite the issue.

The amounts involved for “sales and marketing support”, “strategic partnerships” or however else these payments are dressed up, are substantial. We reveal this week that Tenet is in receipt of payments totalling around £2m a year. Other distributors are quick to decry the size of the Tenet deals, but many stop short of disclosing the amounts they are in receipt of themselves. Nor do they deny that they receive any money from providers in the first place.

It is interesting to note that even shareholders in advice businesses are starting to question whether the multi-million-pound payments can continue year after year. If even the providers are getting worried about the scale of these deals, that should be sending alarm bells ringing at the very highest levels of the FCA. And the fact that providers are questioning whether payments are sustainable, rather than the risk of consumer detriment, says it all.

The FCA says its rules are not new, but neither is this a new problem. Whether it is one deal 
that is going against the spirit 
of the rules or 20, the regulator needs to act, and deal with yet another thorn in its side over the success of the RDR.

Natalie Holt is editor of Money Marketing. Follow her on 
Twitter: @Natalie_Holt_MM

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Trevor Harrington 29th October 2015 at 2:37 pm

    It beggars belief that such a simple rule, which the Regulator can easily check, even on a national scale, can be so easily ignored by the big operators, with apparent impunity.

    What is particularly galling to the small IFA community, is that the substantial majority of us go to extremes to make sure that there are no such conflicts of interests within our own businesses.

    Furthermore, this is not just a recent RDR issue, as your article suggests. The issue of inducements, laid out liberally from the product providers, has been a major issue in retail financial services throughout my personal career, which commenced in 1981 ! It may now be less than it was, but it is still there as a major issue.

    Quite obviously the Regulator still has not totally resolved the basic problem of bribery and corruption. Perhaps the Government should question whether the Regulator has consistently failed throughout the last 27 years, rather than simply focusing on the loudly predicted, multiple failures and destructive effects of the RDR.

    Once they have arrived at the obvious conclusion, the Government might then care to INSIST on the involvement of the small IFA community in the regulatory system, rather than barring them from all opinion and consideration, specifically barring them from direct involvement with the Regulator, as has been the case since “A Day” in 1988.

    Then, regulation might succeed rather quicker …. “like what we told them years ago”.

  2. The main problem was that the RDR mainly concentrated on advisers and perhaps was a little nervous of tackling the networks to which they had somewhat of an ambivalent attitude, believing that they could regulate advisers more easily in a large lump. The model doesn’t seem to have been seriously considered – up till now.

  3. For a short while, some years ago now, Tenet was offering exemption from its normal percentage retention of some of the commission from investments into Sinfonia funds, but that was quickly withdrawn at the behest of the FSA.

    Apart from that, I can honestly say that neither I, nor to my knowledge any other Tenet member, has ever been leaned upon in any way to favour one product provider over another for any reason other than what’s best for the client.

    Whether or not providers presenting their wares at Tenet training days are required to pay anything for so doing, directly or indirectly, I really have no idea. Even if they did, it would make no difference to me and Tenet would almost certainly disapprove if it thought that it might.

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