The FSA’s head of life insurance departments, Nick Poyntz-Wright, told IFAonline that the regulator has seen live examples of firms threatening the integrity of the Retail Distribution Review through “backdoor commissions”.
Earlier this week, the FSA sent out ‘Dear CEO’ letters to 24 of the largest providers, networks and IFA businesses to set out its concerns – though it did not name the firms involved, and said they had not necessarily “done anything wrong”.
In its letter, the FSA set out examples of agreements which may fall foul of the adviser charging rules. It also requested more information about the business’ plans.
Speaking to IFAonline, Poyntz-Wright explained why the regulator had stepped up its investigations.
“You might have payments which look, smell and feel like commission and, if it is feasible to do so, from January we will stamp that out,” he said.
“We want to show our hand and demonstrate our determination, and this also gives us a better chance of understanding what’s going on out there.
“All firms should be taking note of what we are saying and we would like to believe they are all thinking about these issues and making sure they don’t have these arrangements.”
Inevitably, much of the attention in this area has come on the agreements being drawn up between providers and networks and, despite concerns that regulatory pressures could threaten the networks, Poyntz-Wright insisted they still have a future.
“From January, there are certain principles we should apply and everyone knows that; that’s the world all these firms need to survive and prosper in,” he said.
“We don’t see any reason networks couldn’t do that. What we’re saying is they can’t get an unfair advantage by building in some of the distribution agreements which might facilitate backdoor commissions.”
And, while he is reluctant to talk about any specific cases or firms which may be falling short of the RDR requirements, he left no doubt about the signs already out there.
He said: “We wouldn’t be in the position we are today if we didn’t have some concerns or suspicions about what is out there, so there is some evidence.”
