Consumer panel says FSA must end commission payments to advisors
The chairman of the Financial Services Consumer Panel, John Howard, has said that to avoid misselling scandals in the future, the FSA must end commission payments to advisors.
In his foreword to the Financial Services Consumer Panel’s annual report for 2006-2007, Howard said: “Establishing a new system of paying for advice, could prove to be the most important development in financial services since the FSA was created.”
The FSA is considering the future of commission in the Retail Distribution Review set up at the beginning of 2007, and the results will lead to an FSA Discussion Paper, due to be published shortly.
Although the Panel’s annual report welcomes the FSA’s progress on the move towards more principles based regulation, there are still concerns about how firms will measure up. This is particularly so with the Treating Customers Fairly principle, where Howard believed: “the industry is being asked to empathise with its customers – a laudable objective but one which may prove to be beyond the grasp of many organisations”
Looking back over the financial year from April 2006 to March 2007, the Consumer Panel gave its views on the FSA’s main policy decisions affecting consumers. It rates the FSA as weak in its attitude to the increasing amount of industry guidance on FSA principles, claiming important consumer input may be lost; the decision on the Second State Pension which means that up to 120,000 people may lose out through not being informed of potential mis-selling; and the regulation of home reversion schemes, where some important consumer safeguards were not incorporated in the rules.
However, the Panel rated the FSA as very strong on its work on financial capability and in improving its work on consumer communications. It also said it was strong on dealing with problems in PPI, mortgage exit administration fees, and client money in general insurance; and has also stood up strongly for the protections of UK consumers in the transposition of MiFID (Markets in Financial Instruments Directive), from European Directive to UK implementation.
