I am a protection adviser. I know there hasn't been any formal guidance on inducements for protection advisers, but we've seen providers and networks changing their stance and withdrawing inducements. Are there any steps or considerations I should bear in mind ahead of potential regulation?
Alan Lakey, Highclere Financial Services
It's tricky because where does hospitality start and end? If I'm out with an insurance company employee and they buy me a drink, is that an inducement or a friendly gesture? Does anyone believe that because an insurer has bought me a drink, I will use the firm more?
If an insurance company takes me on a ‘jolly', is it an inducement for future business, or thanking me for past business? There is no answer - it's all about perception.
The problem with the FCA inducements paper is it veers towards trimming everything right down. Some sensible practices might be lost. If an insurance company sponsors a meeting of advisers and supplies food and drink, in return it would get a few hours of our time and we would discuss industry issues. If that were stopped, it would be foolish, as it would have been a give-and-take thing.
If a company said ‘We would love for you to do more business with us, we'll take you to Mauritius', that would be strange. It would be seen as an inducement, which also depends on the individual adviser.
I don't think advisers should react in any particular way, as inducements are primarily about insurers. Each adviser has to make their own judgement about how they choose an insurer.
We're influenced in many subtle ways we probably don't even realise, a bit like subliminal advertising. That can't really be dealt with. What should be dealt with is if someone is using a company because it is paying more money or offering freebies.
Chris Hannant, Association of Professional Financial Advisers
I don't think protection advisers are affected in the same way. It's worth bearing in mind that the inducement rules haven't changed, so the FCA has clarified existing rules with greater guidance.
I think common sense should prevail. You have an obligation to manage conflicts of interest. If something makes you go ‘wow, that's amazing', you should consider whether it would influence what you recommend to clients. Advisers need to do what's best for clients under Treating Customers Fairly. I don't think protection advisers will face the same level of scrutiny.
The FCA is focusing its attention at firm level so far, rather than individuals. Obviously that is relevant all the way down, but that has been its focus to date.
Care is needed around reading across from one advice area to another.
What has attracted the attention of the FCA in other areas, such as for investment advisers, is excess. I think it's perfectly reasonable to continue doing a lot of what the industry has done over many years, in terms of people marketing their products, providing opportunities to do business and to learn about products.
I wouldn't have thought ‘business as usual' would attract the attention of the regulator. If it gets out of hand, it might. If certain activities haven't attracted the attention of the regulator so far, why would this change? There's a danger of overly worrying - common sense should rule the day.
Keith Churchouse, Chapters Financial
I believe the FCA will significantly investigate this over the rest of 2014 to ensure there are no biases or inducements to cause advisers to choose one provider over another.
What I would say for protection advisers is this initiative is in its infancy. If the FCA found cause to be concerned, I'm sure it would take its investigations a stage further.
As a protection adviser, I would be a late adopter of any such incentives. Advisers should have robust recording documentation of anything that could be seen to be seen to be an incentive or an inducement.
I would try to stay away from them as much as possible while clarity is made available from FCA investigations.
I also have no doubt the regulator will wheel out the rules for investment advisers across to protection advisers.
In reading those rules I would err on the side of caution. If you read a rule and it could be open to one interpretation or another, I would take the most cautious route.
I think the FCA will make examples of individuals to show it has teeth when it comes to this.
