“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