The Financial Conduct Authority (FCA) is not seeking to pile more pressure on adviser firms already under financial strain by investigating payments they may receive from providers, its director responsible for supervising advisers said.
Nick Poyntz-Wright (pictured) said the regulator was aware of the "pressure some firms are under" financially, but that boards needed to be mindful of how they looked to plug gaps in their income streams.
The FCA has published the findings of a thematic review into provider inducements, which found that some life insurance firms had arrangements in place which could, in the eyes of the regulator, influence advisers.
It said such deals, which became more commonplace in the run-up to the introduction of new rules following the Retail Distribution Review (RDR), may not look like traditional commission - which was outlawed by RDR - but are intended to achieve the same outcome, which is to secure distribution.
More than half of the 80 agreements assessed by the FCA had the potential to represent a conflict of interest, it found. Though Poyntz-Wright said the results "do not make for pretty reading", he said the regulator had not identified any realised consumer detriment it could link back to the agreements.
He said it was not the FCA's intention to wipe out a potential income stream for adviser firms, but that they needed to be mindful of how they sought to generate revenue.
"We are aware of the pressure some firms are under in terms of moving towards a viable business model for the future," he told IFAonline.co.uk. "We believe that, having set out the framework and direction of travel for RDR, firms are successfully doing that.
"But we are conscious that, sometimes, the financial drivers within firms can make the situation worse. We expect boards of firms to be thinking: ‘If we're intent on filling holes in our income stream [in this way], couldn't that be an additional driver which might push us in a direction which could be inconsistent with the ultimate needs of the customer?' There's even more of a need for care in this area."
Poyntz-Wright added many adviser-provider arrangements are viewed by the regulator as perfectly legitimate.
"There are deals that can actually enhance the quality of the outcomes for the customer. Areas like providing training, some forms of IT integration, continuing professional development, and training on products and their technical aspects," he said.
"[But] there can be situations where training events can comprise rather more than just the training."
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