The RDR feedback provided at the FSB Insurance seminar elaborated on conflicts of interest which may impact on an adviser’s objectivity.
The following three were discussed:
- Binders and outsourcing – stricter conflict controls needed
- Production or sales targets
- Ownership or other interests
We recently commented on the second item on the list above, noting the negative impact on clients when an adviser’s contract is cancelled due to insufficient production.
The FSB proposes to prohibit production targets outright, except for tied advisers, where FAIS already disallows pure volume incentives.
The FSB shares advisers’ concern that the threat of product suppliers cancelling intermediary contracts due to low production creates a conflict and views this as an implicit production target.
The Regulator also accepts that it may not be commercially viable for suppliers to provide the same services, and accept the same accountability, for all advisers, regardless of production.
To accommodate both views, the FSB will consult on measures to enable advisers whose contracts are terminated, or made inactive due to low production, to be able to offer reasonable ongoing customer service and earn ongoing contracted remuneration, subject to other relevant competency and remuneration eligibility criteria.