Some life insurance firms continue to have inducements in place that could unduly influence financial advisers, despite new regulations designed to eliminate commission bias in the market, the Financial Conduct Authority has found.
Two firms have been referred to enforcement in specific cases where the regulator discovered potential breaches in inducement rules. These firms have not been named.
An FCA review, published yesterday, set out to discover whether firms continue to be influenced by inducements from product providers, following the introduction of the Retail Distribution Review at the start of the year. The RDR aims to introduce greater clarity and transparency to the financial advice market and remove possible conflicts of interest between advisers and firms providing services.
The FCA asked 26 life insurers and advisory firms to provide information about their service or distribution agreements. In total it received and reviewed 80 agreements.
In the review, the regulator highlighted 'serious concerns and a poor management culture in some firms'. More than half of the firms sampled had agreements considered to be in breach of inducement rules.
Clive Adamson, FCA director of supervision, said the RDR should have heralded 'a step change' in the way advice was given.
'It signalled the end of advice that might be influenced by the commission payments made by produced providers to advisory firms, and the start of a new era of trust and transparency between a firm and its customers,' he said.
'The findings of this review reveal that the actions of some firms have the effect of undermining the objectives of the RDR.'
He urged all firms to review and, if necessary, revise their existing arrangements.
The FCA said it would revisit this area in the future to check that the necessary improvements have been made.
Alongside the review, the regulator published proposed guidance to help firms further understand how they should act. The guidance explains why the FCA thinks certain payments between providers and advisers may cause conflicts of interest and also gives examples of good and bad practice.
