The commission-led sale of financial products is set to be outlawed across the industry under major plans to be announced tomorrow by the boss of the new City watchdog.
The Financial Services Authority has already banned commission payments to advisers under the Retail Distribution Review (RDR), which comes into force on 31 December.
But Martin Wheatley – who will become chief of the Financial Conduct Authority (FCA) when it takes control of financial regulation next spring – intends to widen the clampdown on commission to all financial products, not just investment-related sales.
The former Hong Kong regulator – who became managing director of the FSA last year – plans to use his first major speech to the City tomorrow morning to set out an important marker to financial firms.
He wants to demonstrate to finance firms that a line has been drawn between the light-touch regulation of the last decade and the new tougher line that the FCA will adopt.
Mr Wheatley will admit that the existing regulatory regime has let consumers down.
However he will stop short of blaming the FSA for the widescale scandals of recent years, including payment protection insurance mis-selling, which has so far cost banks £10bn in compensation. He intends to make sure that such rampant mis-selling by commission-hungry sales staff cannot happen again and will warn banks, insurers and building societies, as well as investment firms, that they must play ball with the new regulator and remove commission from the centre of their sales culture.
The City watchdog will also publish tomorrow the details of its latest review into the way financial companies reward sales staff.
The review will reveal major shortcomings in how commission is paid and explain why financial incentive schemes can lead directly to mis-selling, as happened in the case of PPI.
Mr Wheatley will tell the industry that almost all financial mis-selling scandals in the last two decades have been caused by commission payments.
Wheatley's plans will be the first step in the introduction of tough new rules which will affect the sale of insurance policies, mortgages, current accounts and credit cards.Reuse content