City watchdog enforces RDR rules

Two firms are facing enforcement action after the City watchdog uncovered evidence that financial advisers and product providers were flouting rules banning commission payments.

The Financial Conduct Authority (FCA) is launching a crackdown on financial inducements between providers and advisers after finding some firms were continuing to receive payments that could lead to biased advice.

Expensive overseas seminars and training trips, as well as paid-for meetings with senior management teams in adviser firms, were among the “serious concerns” raised by the FCA.

Two firms face enforcement by the FCA after it uncovered potential breaches of its rules, while it said more than half of the firms it reviewed had agreements in place that could undermine retail distribution review (RDR) rules that came into effect this year banning advisers from receiving commission payments from product providers.

The FCA reviewed agreements in place with 26 life insurers and financial advisers and found incentives in the form of large payments made for spending on support services such as research and management information, IT systems, staff training events and hospitality.

It was also forced to step in and halt some joint venture deals, where advisers and providers had worked together on new investment propositions that could lead to biased advice.

In one example, the advisory firm was paid substantial up-front fees by the provider with its profits increasing the more it channelled business into the joint venture.