Financial product providers are reviewing their arrangements with advisers after leading advice network Sesame was fined £1.6m for soliciting payments in exchange for appearing on a product panel.
However, campaigners within the investment industry say that only full disclosure of payments to advisers by providers of financial products will ensure that conflicts of interest do not harm consumers.
“We continue to examine our procedures to ensure we do not breach the new inducement rules,” said product provider LV=, one of the providers listed on Sesame’s panel. It and others including Aegon, Aviva, Friends Life, Partnership, Prudential, Royal London and Zurich, deny any wrongdoing.
The Financial Conduct Authority (FCA) said that Sesame had in 2012 put in place a “pay-to-play” arrangement, meaning it only offered products from providers who paid for services from the network, an arrangement the regulator said had failed to put customers’ interests first.
Reforms brought in at the start of 2013 under the Retail Distribution Review aimed to ensure that providers could not secure sales from advisers or online platforms by paying them commissions. Instead, advisers now charge clients upfront fees.
The regulator has since been cracking down on other benefits that might influence advisers’ choices.
“There is little doubt that over the years many of the larger adviser firms and networks have tried to screw money out of fund managers and insurers in addition to sales commissions,” said Justin Modray, director of Candid Financial Advice.
“Common practices have included charging to be considered for ‘research’ shortlists and attending adviser sales conferences. Lavish corporate hospitality has also been rife.”
Mr Modray said advisers should state what revenues or benefits they are given, so that customers could be confident in the advice they receive.
Gina Miller, co-founder of wealth manager SCM Private, said: “If we don’t have transparency at all levels, there will always be ways of gaming the system.”
Providers of funds, retirement products and insurance acknowledge that they pay for services from adviser networks, such as events and placements in in-house magazines.
But they say this is a separate process from the networks’ choice of products, even when they offer “restricted” lists of only a few providers, as with Sesame.
Royal London said: “We saw the way that things were going and we didn’t get involved in any ‘pay to play’.”
Sesame said that its new leadership, in place since January, has put in place a “new and transparent policy”.
Mike O’Brien, managing director of adviser network TenetConnect, said that consumers can benefit when advisers attend events that use product provider funding.
“What we’re looking to do through these events is to bring to the table topical issues without there being a product or fund push. That means advisers are better educated and better placed to provide a service to the end consumer.”
The FCA also investigated Partnership, an insurer, over its relationship with an advisory firm, but dropped its investigation in October.