The Financial Conduct Authority's (FCA) proposal to totally ban inducements within the financial services profession could ultimately hurt consumers, the Chartered Institute for Securities & Investment (CISI) has warned.
In its response to the regulator's consultation on the Financial Advice Market Review (FAMR), the body raised concerns relating to the proposals on banning inducements and its proposals on qualifications.
In the consultation, the FCA proposed banning firms that provide personal recommendations on retail investment products from soliciting or accepting inducements, but the CISI said an outright ban on inducements is likely to have "unintended consequences".
The body said: "While extravagant hospitality gifts and monetary inducements are clearly unacceptable, the banning of inducements outright is likely to have unintended consequences.
"If firms feel as though they cannot take a client, competitor or supplier out for lunch, or accept a space at a conference for example, then opportunities for people to understand each other will be missed."
It continued: "These activities offer the possibility of collaboration, communication and development, which ultimately benefit the end user, and an outright ban may prove to ultimately disadvantage consumers."
Qualification proposal 'counter-intuitive'
Additionally, the CISI described the FCA's proposed approach regarding qualifications - where it suggested training competence requirements apply only to those staff who provide "personal recommendations" as opposed to those who only provide guidance - as "counter-intuitive".
It continued: "Consumers expect to deal with suitably qualified professionals who they trust, when having discussions about their finances. In light of a long list of mis-selling scandals, there is still a lack of trust in financial services by consumers and narrowing the scope of training and competence requirements is unlikely to do anything to help restore the trust."
It added: "It is our belief that clients would expect the individual they are dealing with to undergo training and competence and have relevant qualifications, irrespective of whether they are providing recommendations or guidance."
Chief Executive and Chartered FCSI Simon Culhane said the FCA had not analysed how the proposals might affect the consumers, and that the second proposal sends a message to them that training and competence are not important.
"The CISI invites the FCA to engage us in a discussion about how T&C can be delivered in a cost-effective way to a wide audience, as we strongly believe that there is nothing to gain by shrinking the knowledge pool," he added.
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