Advisers will be able to receive payments from discretionary fund managers (DFMs) that they referred business to pre-Retail Distribution Review (RDR) but will be banned from receiving such payments for new business, the Financial Conduct Authority (FCA) has proposed.
In its consultation paper published today the regulator proposed to ban referral payments to advisers for recommendations of a top-up investment but will continue to allow referral payments for pre-RDR business.
The FCA also proposed to ban referral payments where an adviser firm does not provide personal recommendations to particular clients, but provides other services to them.
If agreed, the proposals will take effect at the end of next year and top-up payments made before that date will not be affected.
The FCA said it had found that this option, which is one of four originally proposed ways of handling referral payments, appeared to have the least impact on both DFMs and adviser firms, and was less complex for DFMs to administer than other options such as stopping referral payments following fund switches.
The options originally put to trade and consumer bodies were:
- Switch off all referral payments following a transitional period.
- Allow referral payments for pre-RDR referrals to continue, with payments being banned for post-RDR top-ups (currently proposed option).
- Allow referral payments to continue on the original investments, but switch them off following fund switches (similar to trail commission).
- Allow payments to continue for pre-RDR referrals, but reduce the level of payments if a recommendation was made post-RDR to pay more money into the investments held with the DIM.
Advisers can submit their views until 4 October. The FCA plans to publish a policy statement by the end of the year.
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