The Government, the FSA and industry bodies are set for a European lobbying campaign to try to get the Mifid commission ban for independent advice extended to all advisers.
The latest draft of Mifid II, published last week, confirms the European Commission’s intention to introduce a ban on commission only for independent advisers. It confirmed details leaked to Money Marketing last month.
The draft states that when investment advice is provided on an independent basis, the firm must “assess a sufficiently large number of financial instruments available in the market” and must “not accept or receive any fees, commission or any monetary benefits paid or provided by any third party”.
However, there is no mention of a commission ban for other forms of advice.
Aifa director general Stephen Gay says: “There is a real danger Mifid rules could run contrary to the retail distribution review. Proposals to restrict commission payments for independent advisers are of particular concern. We simply cannot have a situation whereby single-tied advisers, working for banks, for example, and receiving commission, are allowed to operate without the same degree of transparency as IFAs. This cannot be good for consumers or the profession.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “The FSA is aware this is going to be a problem. I imagine there has already been discussions at Government level about how to take things forward to try and remain on track with RDR proposals.”
If the draft proposals became the final rules, the FSA would need to secure an exemption from Mifid in order to gold-plate the commission ban and push ahead with its RDR proposals to ban all types of advisers from receiving commission. With the European Union pushing for maximum harmonisation of its directives, many in the industry suggest that lobbying for a change in the directive is the FSA’s best chance of success.
An ABI spokeswoman says: “We are worried this opens up the possibility for restricted or tied advisers to continue to receive payments from product providers
“This contradicts the FSA’s RDR, which the industry has spent considerable time and money preparing for and may also lead to confusion for consumers. There is still time for negotiation and therefore we urge the UK Government to ensure the final directive is in line with the RDR and applies the commission ban to all firms providing investment advice, not just those classed as independent.”
The Treasury has voiced concerns over the proposal to restrict a commission ban to independent advisers, saying it could distort the market.
Speaking at the Association of Private Client Investment Managers and Stockbrokers annual conference, Treasury financial secretary Mark Hoban said: “We remain concerned with the details to restrict a commission ban to independent advisers.
“We feel it could distort the market if you allow advisers to continue to receive inducements from third parties for simply dropping the independent label.”
Tax Incentivised Savings Association director of policy Malcolm Small says: “The Government has been effective in lobbying Europe for changes in the past and I suspect it will be good this time through the work of the Treasury. If the Government is not successful I suspect we will have to abide by the European directive and get on with it.”
Jackson’s Financial Services managing director Pete Matthew says: “It has the potential to undo everything the RDR is trying to do. It would be good to see the Government step in.”
“Another example of the FSA’s ’Of course we are right and everyone else is wrong’ attitude exposed. Why go through the rigmarole of RDR at all if we are going to get stitched up by the banks who will continue to take the commission and use it to bludgeon the independent sector into oblivion? A sad day for the customers if this stands.”
”I hope the FSA will get its ’gold plating’ on this one.”
“Just when we start to believe we will be treated fairly, the EU pulls the rug from under out feet. If this directive goes ahead, all IFAs should register as restricted advice to compete with banks and direct sales.”
”I am under the impression the UK regulator has a fairly big seat at the Mifid table and so assuming this draft will remain is a little premature. Alternatively, if it remains and becomes legislation, the entire system needs kicking into touch. So many temptations to have a go at those that suggest we imagine the future in the present as we provide advice for which we seem liable for the rest of eternity. But as I say, it is still just draft.” Dominic Thomas</B>
“If this turns out to be gospel, I assume many of the voices on these blogs will have a Road to Damascus experience and will embrace the world of the restricted adviser. After all, a commission ban is no good for a transactional adviser.”