Biba has concerns over the FSA's review of IFA commissions
The FSA’s retail distribution review (RDR), while not directly relevant to the general insurance sector, has nonetheless caused a stir in the insurance industry.
The RDR looked at the remuneration of independent financial advisors. Under the proposals that followed financial advisers would only be able to call themselves ‘independent’ if they are paid by fees rather than commission.
A lower tier of financial advisers and tied agents would be remunerated by commissions.
What caused some in the market, including Biba, to sit up was a suggestion by the FSA that the ideas contained within the proposals could be put applied to other sectors of the financial services industry.
Against the backdrop of the FSA’s investigation into commission disclosure and transparency this suggestion is of concern.
Fee-based remuneration is appropriate for some general insurance clients but not all.
Biba was quick to respond, warning against seeing the ideas from the review applied to the general insurance sector.
“There must be no attempt to read across any changes that may emerge from the review into the general insurance regulatory regime,” Biba said.
It argues that the review’s concepts, if applied to the insurance sector, would lead to consumer detriment and would not support or promote independent advice. It could also confuse consumers.
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