Two firms are facing action from the Financial Conduct Authority after a review by the regulator into inducements uncovered evidence of life assurance and advisory firms "undermining the objectives of the Retail Distribution Review", despite the ban on commission payments at the beginning of the year.

Two firms are facing action from the Financial Conduct Authority after a review by the regulator into inducements uncovered evidence of life assurance and advisory firms "undermining the objectives of the Retail Distribution Review", despite the ban on commission payments at the beginning of the year.

The review found evidence that some firms continue to be influenced by inducements from product providers, despite the [tag|rdr|]RDR[/tag] coming into effect in January.

A number of other firms involved in the review have also changed their arrangements as a result of early action by the [tag|FCA|]FCA[/tag].

The FCA asked 26 life insurers and advisory firms to provide information about their service or distribution agreements and in total received and reviewed 80 agreements.

The regulator said it was concerned that some payments by life insurers to advisory firms appeared to be linked to securing sales of their products and that financial arrangements were also in place that incentivised advisory firms to promote a specific provider’s product to their advisors, undermining the aims of the RDR.

Furthermore, the FCA also identified that certain joint ventures between providers and advisory firms could create conflicts of interest and potentially lead to biased advice.

“The changes we made to the retail investment advice sector were designed to mark a step change in the way advice was given. It signalled the end of advice that might be influenced by the commission payments made by product providers to advisory firms, and the start of a new era of trust and transparency between a firm and its customers," said Clive Adamson, the FCA’s director of supervision.

"The findings of this review reveal that the actions of some firms have the effect of undermining the objectives of the RDR," he added.

In other news, as reported elsewhere on this website, The New City Initiative, a think-tank for independent asset management companies, said it welcomed the FCA’s consultation on the Alternative Investor Fund Manager Remuneration Code which was published earlier this month.

The current AIFM Remuneration Code sets out high level principles on the governance of remuneration and alignment of staff incentives with sound and effective risk management and risk taking. The consultation includes amendments to the rules making them less onerous for AIFMs.