Impact of ban on financial adviser commissions will be monitored by Parliamentary committee

From the end of this year financial advisers will only be able to receive payments for their services direct from their clients under new rules set by the Financial Services Authority (FSA). Advisers must set their own charges for the services they provide and those charges must solely be based on the level of service they provide rather than the arrangements that have in place with the provider of the product they recommend.

The impact of those rules on consumers will be assessed by the Treasury Select Committee, according to the committee's chairman, Andrew Tyrie.

"The banning of commission and the introduction of a clear market price will be carefully monitored by the Treasury Committee in an effort to ensure that the expected benefits flow to consumers," Tyrie said in a statement.

Tyrie also called on the FSA to better educate consumers about the FSA's new Retail Distribution Review (RDR) rules on financial advice.

"As the deadline approaches, it is important that the FSA redoubles its efforts to inform the public of the changes and to increase the levels of industry compliance," he said. "The publication last week of a new, FSA guide to financial advice is a step forward."

Tyrie comments followed failed attempts by the Committee to convince the FSA to delay the implementation of the adviser charging rules, together with others drafted following the regulator's RDR, until the end of 2013.

In a letter (1-page / 379KB PDF) to the FSA's managing director Martin Wheatley in June, Tyrie expressed particular concern about the "cliff-edge nature of the implementation of the RDR", claiming that some financial advisers would not be meet new standards of professionalism set by the RDR before the end of the year.

Under the RDR financial advisers generally have to pass new examinations to ensure that they are suitably qualified in order to provide advice on retail investment products to consumers.

However, in response (4-page / 355KB PDF) to Tyrie's letter the managing director of the FSA, Martin Wheatley, said that financial advisers do not necessarily have to sit "traditional examinations" to meet the new "professionalism requirements". He said that there were "over 60 appropriate qualifications" financial advisers could obtain that do not involve sitting exams. These "range from case study based reports to interview style assessment," Wheatley said.

Wheatley also said that financial advisers can apply to the regulator to waive the qualification requirements. The regulator can only do so if financial advisers can "demonstrate that the [qualification requirements] rule is either unduly burdensome or not fit for purpose and that modifying it does not create an undue risk for consumers," according to Wheatley. He said that advisers need to provide the FSA with "robust evidence" that show that there are "exceptional circumstances" preventing them from obtaining "an appropriate qualification" before the end of this year.

The FSA has granted 18 waivers to financial advisers, according to Wheatley's letter, mainly on grounds of ill-health to the advisers or members of their family.