The Financial Services Authority says market average commissions used in the depolarisation menu will not be altered, despite industry feedback suggesting they are not representative of products' average rates.
The Association of IFAs had previously questioned the way in which the FSA had calculated market average commissions on lump sum collective investments ( Aifa raises concerns over menu market averages, Tuesday 1st March 2005) because the majority of data included cases which paid out trail commission only, and was therefore substantially lower than the standard model, said the Aifa.
Similarly, the Aifa has expressed concern about the inclusion of market average rates for short-term endowment investments such as guaranteed growth bonds (GGBs), as they are listed in the same category as ‘single premium whole of life or endowment policy’ calculations yet FSA research indicates the bulk (80%) of products paid commission of over 5% and therefore does not match the 4.99% npv presented by the FSA.
However, David Severn, director general of the Aifa, says the trade body will be issuing a newsflash to members in the near future as the FSA has now said it feels the market averages are “good enough to use”.
"That is disappointing news and we have asked the FSA to delay their June 1st deadline as the menu is still a bit of a mess and there is a credibility issue," says Severn.IFAonline
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