UK FSA to ban DFM-to-adviser kickbacks

The UK Financial Services Authority (FSA) is consulting on a change to its adviser charging rules to ensure advisory firms do not receive any kick-back payments from discretionary investment managers in exchange for recommending their services.

The regulator had already stated its intention to ban the payments in March, but is consulting now to make sure its message is “clear”.

Under the UK Retail Distribution Review’s adviser charging rules, advisory firms should only be paid for the personal recommendations and related services they provide to their clients through the charge agreed with their client, the FSA said, and not remunerated by discretionary investment managers.

According to the proposals, payments between a DFM and an adviser will not be permitted if the adviser has an ongoing relationship with the client that may involve the recommendation of retail investment products.

However, if an adviser is simply introducing a client to a DIM, and from that point is no longer involved in making retail product recommendations to that client, an ‘introductory’ payment from the DIM to the adviser can be made.

The ban on referral payments will apply to referrals of new clients only, from 31 December 2012 onwards.


This article was first published on IFAonline

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