The FSA is "having second thoughts" on the issue of commissions vs. fees in the debate over proposal...
The FSA is "having second thoughts" on the issue of commissions vs. fees in the debate over proposals put forward in CP121, Paul Smee, AIFA director general has told today's Tenet Group annual conference.
Arguing that research showed there was hardly any bias in the way financial services products were sold under commission - and in the case of the pensions market there being no bias found at all - Smee says consumer tests have clearly found that DPS does not work.
AIFA is also concerned that CP121 does not offer a level playing field between independent intermediaries and tied agents, adds Smee, because there is not indication at this stage that tied agents working for banks and building societies will be required to inform consumers of the costs of the advice delivered, when IFAs will be required to do so.
Smee says the FSA would be doing a great disservice to the industry if it did not ensure a level playing field, suggesting that back-room accountancy must not be allowed to enable banks, and tied agents to hide costs incurred.
Continuing with a theme that AIFA has recently flagged up, Smee says that "two-tier" advice is a misnomer, but suggests the fact it is even mentioned in CP121 is "recognition that current conduct of business rules are too cumbersome".
AIFA is pursuing talks with the FSA about this, he adds, because it is important to recognise the specialist skills set that will be required to get through the minefield that is state benefits in relation to advising on pensions savings.
Smee says the AIFA expects Ron Sandler to report on his Review on 9th or 16th July, however, the association is already engaged in developing responses to some 22 reviews at present - indicative of the paper overload currently being faced by the industry.
He adds, however, that the Sandler Review "is not a paper exercise" as the author has "talked to lots of IFAs".
"It's going to be a mixed bag, but a fairly punchy read," Smee predicts.
Smee also suggests that making the workplace the key conduit for providing advice, would only work if administration and back-end support is up to scratch.
Capital adequacy and PI will be big issues in the next few years for the entire financial services industry, he predicts, while the FSA need to take a hard look at the current risks of "regulator overload" caused by the complex structure of the regulator and the number of reviews it is taking on.
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