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Daily Insurance Industry News
Friday 27th of April 2018
March 27, 2010

Commission ban on investment advice in 2012

by Gill Montia

Story link: Commission ban on investment advice in 2012

The payment of commission to financial advisers who recommend specific investment products is to be banned in 2012.

New rules published by the Financial Services Authority (FSA) mean that from the end of 2012, firms will have to be upfront about how much they charge for their services.

The changes also mean firms offering independent investment advice will have to demonstrate that any product selection is made in their clients’ best interests.

According to the regulator, paying upfront for advice will not necessarily prevent consumers obtaining the advice they need.

Where a customer feels they cannot afford an upfront fee, or prefers to bundle the cost of advice with the cost of a product, firms will be able to facilitate this but must make it clear how much is charged for the advice.

The Association of British Insurers (ABI) believes the new measures will really help consumers by enabling them to better understand how they are charged, and whether or not the advice they receive is fully independent.

However, the ABI wants the regulator to help those who can’t afford, or don’t need, full financial advice.

With this in mind, the body has developed proposals for “simplified advice”, which it says can provide consumers with a suitable recommendation based on a limited assessment of their financial needs.

To make further progress, the ABI says it needs “greater certainty” from the FSA and the Financial Ombudsman Service regarding the qualifications that would be needed by those giving the advice and how consumers should pay for such a service.

Finally, the ABI says it is pleased the FSA has recognised that protection products are different from investment products and “in particular that commission on pure protection products does not lead to poor consumer outcomes”.

 

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