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FA commissions are undermining fair treatment of clients
| Published: | 22 Jan at 6 PM |
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A study by the UK’s Financial Conduct Agency has confirmed that the payment of commissions to FAs by financial firms acts against the best interests of clients.
The research, undertaken to evaluate the recently introduced Retail Distribution Review (RDR) rules, reveals that customers are still being diverted from investments suited to their circumstances to those which pay the adviser the highest commission. The RDR came into force in 2013 and banned commission payments to FAs for giving financial advice.
Results suggest that providers are entering into a commission war by offering FAs perks over and above what is allowed by the RDR rules. Although the review allows some payment from financial firms to financial advisors, it must be based on the reimbursement of reasonable expenses and must benefit the service offered.
Evidence that certain financial products were linked to commissions was found, as was evidence linking certain product providers with FAs in order to encourage sales ahead of other providers’ products. The way financial service sales were arranged clearly caused a conflict of interest and involved the giving of biased advice.
Expats living overseas are advised to take special notice of the FCA’s comments, as they have no protection against biased advice from FAs claiming to be registered in the UK as well as no claim in the UK should a service prove to be mis-sold by FAs pushing unsuitable products for their own gain. Abuses of this type have been widely reported in many expat destinations, and potential investors should do their own comprehensive research before committing to any product.
The research, undertaken to evaluate the recently introduced Retail Distribution Review (RDR) rules, reveals that customers are still being diverted from investments suited to their circumstances to those which pay the adviser the highest commission. The RDR came into force in 2013 and banned commission payments to FAs for giving financial advice.
Results suggest that providers are entering into a commission war by offering FAs perks over and above what is allowed by the RDR rules. Although the review allows some payment from financial firms to financial advisors, it must be based on the reimbursement of reasonable expenses and must benefit the service offered.
Evidence that certain financial products were linked to commissions was found, as was evidence linking certain product providers with FAs in order to encourage sales ahead of other providers’ products. The way financial service sales were arranged clearly caused a conflict of interest and involved the giving of biased advice.
Expats living overseas are advised to take special notice of the FCA’s comments, as they have no protection against biased advice from FAs claiming to be registered in the UK as well as no claim in the UK should a service prove to be mis-sold by FAs pushing unsuitable products for their own gain. Abuses of this type have been widely reported in many expat destinations, and potential investors should do their own comprehensive research before committing to any product.
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