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‘More dramatic than the RDR’: Inducements review could force firms out of business

Some large advice firms face a significant profits hit in the wake of the FCA’s clampdown on provider inducements, raising questions about their sustainability.

Last week, the regulator published new guidelines on inducements and conflicts of interest after a thematic review of 26 providers and advice firms found over half could be in breach of its rules and risked “undermining the objectives of the RDR”.

The guidelines cover payments from providers to advice firms for things like training, conferences and seminars, and hospitality, severely restricting the money that can change hands when these events take place.

Threesixty managing director Phil Young says the regulator’s tough stance on inducements will have a bigger impact on the advice sector than the RDR.

He says: “Providers will either say they are not making these kind of payments any more or they will drag their heels because the FCA’s guidance has put them in a much stronger negotiating position.

“The problem is for a lot of the big advice firms and support services providers these payments are a massive proportion of their total revenue, so they just cannot survive without it.

“If that gets taken away then they either have to put their prices up or they will go under.

“This will have a more dramatic impact on the market, in terms of being a big negative earthquake, than the RDR.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “People would be shocked at the size of payments from providers to advice firms.

“If these firms have to stand on their own two feet then most, without any contribution from providers, would be in a loss-making position.”



Ed Balls joins warnings over Help to Buy

Shadow chancellor Ed Balls believes the Government’s Help to Buy scheme will send house prices soaring without more housebuilding. Help to Buy consists of a shared equity loan scheme for new-build homes worth up to £600,000, which launched in April, and a mortgage indemnity guarantee for all homes worth up to £600,000 which is set […]


Miton’s Gray happy to hold cash amid “struggle” to find value

Miton Asset Management multi-manager Martin Gray says he to keep a large weighting in cash as he admits he is “struggling” to find good value in the market. Gray, who is holding 25.50 per cent of the £870m Miton Special Situations Portfolio in cash, says: “We are struggling to find value out there in anything. […]


Fund managers to pay for Labour plans to scrap bedroom tax

Labour leader Ed Miliband has pledged to repeal the Government’s controversial “bedroom tax” which will be partly funded by reintroducing a tax paid by UK-based fund managers. The so-called bedroom tax, or “spare room subsidy”, was a reform to housing benefit which came into force in April. Under the changes, council house tenants deemed to […]

Europe: banking on a recovery

Neptune video: Europe — banking on a recovery

Arguing that the eurozone crisis is over, watch Rob Burnett, head of European equities at Neptune, discuss the sectors that he’s investing in to harness the recovery. 

In the video, Burnett addresses the following: 

• The primary drivers of the eurozone’s economic recovery
• The turnaround in individual countries’ current accounts
• Sectors best positioned to harness the recovery, without offering undue exposure to risk


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