IFAs set to quit over commissions ban
26 Jun 09
FSA plans overhaul of rules regarding selling
Thousands of independent financial advisers (IFAs) could leave the industry as a result of a planned ban by the Financial Services Authority (FSA) on commissions they receive for selling investments
In a radical overhaul of the rules governing IFAs, the FSA said in its consultation paper on its Retail Distribution Review that payments from fund managers and life assurers to advisers would be outlawed in three years.
The FSA said it intended to drive “commission bias” out of the system and ensure that “recommendations made by advisers are not influenced by product providers”.
Commission payments have been blamed for mis-selling scandals over the past 20 years involving mortgage endowment policies, personal pensions and stock market-linked bonds.
The watchdog said it would ban product providers from offering commission to secure sales, and ban advisers from recommending products that automatically paid commissions.
Instead, investors will be told up front how much advice would cost and will be able to choose whether to pay a fee or have the cost deducted from their investment. Crucially, the amount the adviser receives for recommending a product will be negotiated with the investor and not determined by the provider.
“This is a great day for the consumer,” said Andrew Fisher, chief executive of Towry Law. “It is a ban on the bribery and corruption that has plagued the industry. Mis-selling driven by commission should now end.”
To download the FSA’s consultation paper on its Retail Distribution Review, click here