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Partnership confirms FCA probe into adviser incentives

Partnership has confirmed it is being investigated by the FCA as part of the regulator’s crackdown on incentives between providers and advisers which undermine the RDR.

In a statement to the stock market this morning, the firm says it received notification last night from the FCA that it has appointed investigators to probe the distribution agreement between the insurer and an adviser firm.

It says: “The investigation will seek to determine whether the Company has contravened the FCA’s rules, including changes introduced by the RDR.”

“The notification makes clear that ‘the appointment of investigators does not mean that the FCA has determined that rule breaches and/or other contraventions or offences have occurred’.”

Partnership’s shares fell 7 per cent yesterday following a report in the Financial Times suggesting it was one of two firms being investigated by the regulator. 

The FCA this week revealed that two firms could face enforcement action after a thematic review found evidence that arrangements between providers and advice firms could undermine the RDR.

The regulator asked 26 life insurers and advisory firms to provide information about their service or distribution agreements. It received and reviewed 80 agreements and found just over half of the firms had deals in place which could breach inducement rules. 

These included payments by life insurers to adviser firms which appeared to be linked to securing product sales, insurers incentivising advisers to promote products and joint ventures which could create conflicts of interest and potentially lead to biased advice.

Partnership is involved in a number of distribution deals with independent and restricted adviser firms.

In April, Money Marketing revealed Openwork could receive more than £15m from Partnership under the terms of a controversial single-tie annuity deal. 

Openwork says it is not involved in any enforcement action related to the FCA’s thematic review into incentives.

Partnership has a distribution relationship with Sesame, alongside a number of other adviser firms.

In April 2010, Partnership bought a 50 per cent stake in Sesame Bankhall Group’s retirement referral arm Gateway Specialist Advice Services. At the time it was estimated the deal cost between £500,000 and £1m.

Sesame refused to comment. 

Henderson set up a number of joint ventures with adviser firms including Sesame and Intrinsic. A proposed joint venture with Paradigm was axed in April.  

In a statement, Henderson has confirmed that it is not involved in any threat of enforcement action as part of the FCA’s thematic review. 

A Henderson spokesman says: “We cannot discuss commercially confidential matters, but we are satisfied our UK retail joint ventures meet both the regulations and the spirit of RDR. We can confirm that Henderson is neither in enforcement nor has it been referred to enforcement for this or any other matter.”

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Comments

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

  1. Whatever the rights and wrongs of the issue I look back at the week and wonder how this actually helps the cause of the RDR. The aim of the RDR was to get people engaging with financial products and services and one barriers was the poor reputation the industry has e.g. mis-selling, lack of professionalism. Yet still we have public pronouncements like this about the failings of the industry – the BBC website has a headline this week something akin to IFAs receiving hidden payments from providers. More negative publicity from a regulator trying to enforce the RDR! It is a vicious circle and perhaps a little more secrecy may be better? Especially as the case is not yet proven.

  2. Are you serious Sam?

    You appear to be advocating the cover up of any wrong doing. I don’t think this type of attitude is going to improve the perception of the industry!

    We need to Name and Shame any party guilty of wrong doing, and I would encourage the FCA to sharpen their teeth and make an example of any rule breakers to discourage anyone else thinking of bending or breaking the rules.

    We need to create an atmosphere/culture of everyone being whiter than white, and being too scared to be seen to breaking the rules. Only then will we improve the perpection of this industry.

    Covering these stories up, will only encourage more bad practice.

  3. My point is that we are in danger of destroying trust in our profession. Folks will always find a way to circumvent rules and it will never be the case that we eliminate bad conduct. It is naïve to think that we can operate in a whiter than white world and the FCA in many ways will want to justify its own existence by highlighting issues. Negative stories like this do not help when in the majority of cases the RDR has been a success.
    I am not advocating cover ups but I am not supporting the idea that every potential breach of the rules is reported in such a way as to systemically destroy the profession the majority of us care for.

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