15 January 2016 – Tracey McDermott, the interim Head of the Financial Conduct Authority (FCA), Britain’s financial watchdog, said she “wouldn’t rule out” the return of commission payments in the UK.
In a radio interview last Saturday (9 January 2016), McDermott said that in order to improve the way financial advice and guidance is delivered, some element of commission might be re-introduced.
Commissions were banned in the UK in 2014 as part of the Retail Distribution Review. This means that financial advisers are not allowed to accept sales commissions from product providers.
The European Investors’ Association (European Investors) believes a return of commission-based selling, as suggested by the FCA, would be very harmful to retail investors in the UK. Commission payments incentivize financial advisers to put their own commercial interests ahead of their clients’ interests, and not to advice those products that best fit their clients’ needs.
European Investors has expressed its concerns in a letter letter to the FCA. Click here to read more about European Investors’ position on commission payments.
Update: In response to our letter, Tracey McDermott stated: ” “I agree with you that we do not want to go back to a world where advice could be tainted by commission bias”. She added: “we want to avoid a return to the pre-RDR situation (…) where the market was not functioning in the interests of consumers”.