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Life insurers and advisers breaking impartiality rules, regulator finds

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19th Sep 2013
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Some life insurance firms are breaking guidelines by having arrangements that could influence advisers, the financial regulator has said.

The Financial Conduct Authority (FCA) has investigated whether insurance firms continue to be influenced by "inducements" from product providers, despite the Retail Distribution Review (RDR) coming into effect in January 2013.

The FCA's review  found some life insurance firms had arrangements in place which could influence advisers, contrary to the Retail Distribution Review (RDR), which came into affect in January 2013.  RDR’s objective is to remove commission bias in financial advice.  

Many of the firms reviewed have now changed their arrangements due to early action by the FCA, the FCA said. Two firms have been referred to enforcement in specific cases where the FCA identified potential rule breaches, it said.

The FCA has published draft guidance to help firms further understand how they should act. The guidance explains why the FCA thinks certain payments between providers and advisers may cause conflicts of interest and also gives some helpful examples of good and bad practice. This includes how advisory firms might want to deal with conflicts caused by providers paying for IT development and maintenance, staff training, conferences and seminars, hospitality, research and promotional activities.

Clive Adamson, the FCA's director of supervision, said it would make an other inspection of firms' relationships with advisers to check that they are sticking to guidelines.

The RDR came into force on 31 December 2012 . It made clear how much consumers pay for financial advice, what they pay for, and improved professional standards by introducing a minimum level of qualification for all investment advisers.

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