UK's FSA too proposes to ban commissions

The Securities and Exchange Board of India (Sebi) is not the only one to have banned commissions for mutual fund distributors. Last week, the United Kingdom’s Financial Services Authority (FSA) proposed to ban financial advisors from taking any commission for selling investments, life insurance products and pension plans from end-2012. “Our proposal will remove the commission-bias from the system; recommendations made by advisors will not be influenced by product providers,” said an FSA spokesperson.

The guidelines are quite similar. The amount that the advisor receives will have to be negotiated with the investor and not determined by the product provider. This is similar to the guideline issued by Sebi under which investors will have to negotiate the amount with the distributor.