FSA chief tells MPs of commission ban

9th March 2011

Under questioning, Sants said this could amount to 6,178 individual advisers.

The FSA chief executive was providing evidence to MPs about the retail distribution review, a reform of financial advice due to come into force at the end of 2012.

By then advisers must have obtained more qualifications and changed the way they charge for their advice.

Any adviser charges will have to be agreed with clients, and commission currently paid on many retail pension and investment products will be banned.

Some IFAs have complained about the reform saying it will not help consumers and add costs to the industry while forcing some, especially  older advisers, out of business ‘orphaning' their clients.

Mr Sants distinguished his estimate from a previous range of 10 to 20 per cent, and said that range referred to a ‘conflation' of the number of IFA firms and advisers.

He said the FSA's cost benefit analysis suggested such a fall in numbers still meant the reform was worthwhile but would not be drawn on what level of fall would not be worthwhile.

FSA head of retail policy Sheila Nicoll told the committee it was the regulator's view that the RDR reform would increase consumers' trust in financial services.

Asked whether savings products needed to be sold, hence the reason for concern about the fall in adviser numbers, Nicoll said: "If you do accept that something needs to be sold, it would be easier to sell if people trust the person selling."

Sants added: "Our obligation is to get an efficient, effective and fair market for investors."

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