FSA outlaws commission charges

A radical overhaul of the sale of financial products in the UK is on the way after the FSA confirmed it will press ahead with its plan to remove commission-based advice.From 2012, firms will not be able to accept commission in return for recommending specific products, the FSA said. Instead, customers and advisers will have to agree fees for advice without any outside influence from product providers."Consumers will know what they are buying upfront, how much it will cost them and also have the peace of mind that it was recommended to suit their needs," the FSA said.Firms offering independent advice will have to justify their recommendations on an unbiased analysis of the market and the needs of the customer, the regulator added. "Today's new rules are designed to boost confidence and trust in the retail investment market by removing commission bias, actual or perceived, and exploding the myth that investment advice is free," Sheila Nicoll, FSA director of conduct policy, said."It is vital that consumers know not only the cost of financial advice, but also its value. There is a need to reconnect the adviser and client, where one pays for the services of another, and without the distraction of commission. Only then can consumers have real confidence and trust in the advice they are receiving," she added.The changes are the culmination of the watchdog's Retail Distribution Review launched in 2006.Consumer groups welcomed the announcement, citing recent numerous scandals blamed on commission -led advice."At last, the distortion created by commission will be removed from investment advice. Once the new rules are in place, independent advice will have to be truly independent and not undermined by any commission paid by the product provider," Adam Phillips, chairman of the Financial Services Consumer Panel, said.