The interim head of the Financial Conduct Authority (FCA), Tracey McDermott, has been criticised by financial reform campaigners for envisaging a return to the days of commission-driven sales of financial products.
A set of regulatory changes known as the Retail Distribution Review (RDR) was introduced in 2014 obliging financial advisers to charge upfront fees for their services to retail clients, rather than accepting sales commissions from product providers. The logic was that commissions created an incentive for mis-selling.
Last week Ms McDermott told the BBC’s Money Box that she set up an “expert panel” to consider whether to allow commission-based selling of investment products again. She also said that “we do not want to go back to a world where we had the problems of the pre-RDR, what we do want to look at is actually what is the best way of delivering advice and guidance across the market so I wouldn’t rule out that there may be some element of commission, but we are not going to reverse the RDR.”
Richard Lloyd, executive director of the consumer group said: “The FCA appears to be sending conflicting signals. It has acknowledged the damaging role commission in financial advice has played in the past, and yet won’t rule out allowing its return. No one wishing to restore trust in financial services should want a return to the days when commission was hidden and incentivised mis-selling.”
Howsoever, in another interview over the weekend, Ms McDermott said she “wouldn’t rule out” allowing the retail industry to sell products on a commission basis again, even though banks have been hit with tens of millions in fines for mis-selling investments and insurance to the public during the boom years.
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