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TCF could see firms ditch the commission model

Treating customers fairly will be used to force firms to abandon the “merry-go-round” commission model, says the FSA chairman.

Speaking at a Treasury select committee meeting this week, Sir Callum McCarthy said the regulator cannot encourage a change in business model from the sidelines. McCarthy said TCF would be used to make it more difficult for people to use the traditional commission model attacked by McCarthy in Gleneagles without making significant amendments to it.

The FSA chairman warned if firms did not change their current reliance on upfront commission, new entrants will come into the market to take their place.

He said the regulator’s distribution review will be looking to see where FSA regulations are exacerbating the problems he identified in his recent Gleneagles speech.

McCarthy said the regulator’s provider/distributor relationship work was aimed at stopping providers thinking they can be “quarantined” from misselling when offering high commissions to advisers.

FSA chief executive John Tiner told MPs not as many people as he had hoped are paying by fee for advice, and he blamed advisers for not highlighting the fee option properly and said the FSA will “push harder” in this area.

McCarthy said: “We are going to make it more difficult for people to administer the commission in the way it has been administered in the past without recognising their responsibilities.”

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