The Financial Services Consumer Panel has urged the Financial Services Authority to end commission payments to advisers to avoid future mis-selling scandals.
John Howard, chairman of the FSCP, says: “Establishing a new system of paying for advice could prove to be the most important development in financial services since the FSA was created.”
The FSA is considering the future of commission in the Retail Distribution Review set up at the beginning of 2007, and the results will lead to an FSA Discussion Paper, due to be published shortly.
While the FSCP’s annual report welcomes the FSA’s progress on the move towards more principles based regulation, there are still concerns about how firms will measure up.
This is particularly so with the Treating Customers Fairly principle.
Howard adds: “The industry is being asked to empathise with its customers – a laudable objective but one which may prove to be beyond the grasp of many organisations.”
The FSCP rates the FSA as weak in allowing an increasing amount of industry guidance on its principles, claiming important consumer input may be lost.
It also criticises the FSA’s decision on the Second State Pension, which means that up to 120,000 people may lose out through not being informed of potential mis-selling.
The FSCP is also disappointed that some important consumer safeguards were left out under the regulation of home reversion schemes.
However, the FSCP rated the FSA as very strong in its work on financial capability and in improving its work on consumer communications.
It also said it was strong on dealing with problems in payment protection insurance, mortgage exit administration fees, and client money in general insurance.
It also applauds the FSA for standing up for consumers in the UK implementation process of the Markets in Financial Instruments Directive.