Vertically-integrated firms’ in-house reward structures will be investigated by the FSA to make sure they do not avoid RDR rules or increase the risk of consumer detriment.
In its report on the RDR, published in July, the Treasury select committee said it did not want to see banks using internal remuneration to get around RDR rules on commission.
The FSA’s response, published last week, says it has begun a review of firms that manufacture and distribute products to ensure this is not happening.
The regulator’s response says: “This includes assessments of firms’ proposed adviser-charging schedules and will consider whether they are consistent with our rules. If they are not, we will take action.
“This will assess whether incentives increase the risk of misselling and whether such risks are adequately controlled.”
The regulator says it wants to see a level playing field for different types of advice firms and it will publish its findings in early 2012.
In its written submission to the select committee’s inquiry, Barclays called for the high-net- worth market to be exempt from the full RDR requirements because these clients are more financially sophisticated.
The FSA’s response to the report rejects that call, citing research showing that 14 out of 16 wealth management firms pose a “high or medium-high” risk of consumer detriment.
It says: “This suggests the notion of a sophisticated client base is not universal in the sector and excluding those firms would not be in their customers’ interests.”