This guidance is likely to be of most relevance to providers manufacturing retail investment products for advisers and any advisory firm providing personal recommendations in relation to retail investment products. It includes those circumstances when payments are made by providers to unregulated third party firms for the ultimate benefit of the advisory firm. It does not apply to firms within the same group that both manufacture and distribute their own retail investment products, or where the advisory firm is an associate of the provider. Under these circumstances the rule at COBS 6.1A.9R applies.
One of the central objectives of the Retail Distribution Review (RDR) was to remove the potential for adviser remuneration to distort the advice consumers receive. By ending commission payments from providers to advisory firms, we wanted to help ensure that:
We wanted to check that firms were not undermining these objectives so we assessed whether:
Such behaviour could result in firms breaching Principle 8 (Conflicts of interest) and the inducements rules.
This report sets out the findings of our thematic supervision work on the payments made by life insurers to advisory firms under service or distribution agreements. It also sets out guidance for consultation on how such agreements can breach Principle 8 and the inducements rules and so undermine the objectives of the RDR.
A cost benefit analysis (CBA) is included in this consultation.
Do you have any comments on the proposed guidance?
Do you agree with the cost benefit analysis?
Are there any other costs or benefits we have omitted?
Or send your responses to:
Life Insurance Department, Supervision Division
The Financial Conduct Authority
25 The North Colonnade
London E14 5HS
Telephone: 020 7066 2736
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