The Financial Services Authority (FSA) has written to the CEOs of 24 product provider and advisory firms warning them not to use distribution agreements and cross-subsidies to ‘work around’ the Retail Distribution Review (RDR) commission ban.
The regulator said it is worried that firms may try to bypass the adviser charging rules by soliciting or providing payments or benefits.
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The FSA also said that it would take "robust action" if there is sufficient evidence of the rules being circumvented, although it was not seeking a total ban on arrangements made between providers and advisers.
‘Biased’ advice given out
The FSA said the supervisory work it had been carrying out had alerted it to moves in the market that "could undermine the RDR adviser charging provisions and also unfairly disadvantage those advisers who are working hard to treat their customers fairly and prepare for the upcoming changes".
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By GlobalData"This might mean that advisers continue to provide ‘biased’ advice to consumers, when recommending a product provider, and also make some firms’ adviser charges look lower than others simply because of the deals and arrangements they have in place with providers," the FSA added.
"Money from these arrangements would effectively cross-subsidise the cost of advice and could cause firms to recommend certain providers and products over others," it added.
