Corporate IFAs face further competition from other "professional firms" if the government decides to loosen Financial Services and Markets Act rules regulating occupational pensions trustees' investment activities.
Furthermore, the possible changes might also increase the risk of "misguided decisions", admits the Treasury.
The Treasury has today published its Financial Services and Markets Act 2000 (FSMA) two year review: changes to secondary legislation , in which it proposes to make some amendments to the Business Order setting out the rules for trustees.
One of the changes set out in the document is the proposal to relax restrictions on who is eligible to advise trustees on investments.
That said, while the amendments might make it harder for IFAs to gain the same levels of business from existing clients, the Treasury suggests these changes could also increase the potential for future "mis-selling" dramas.
The document states: "Deregulating trustees' investment activities, and in particular extending the range of exempt investments, may increase the risk of misguided decisions."
Right now, an adviser has to be authorised, exempt from authorisation under specific FSA terms or an overseas person. However, under the suggested rules, any professional firm - even though it is not authorised - will be permitted to give trustees investment advice.
But while this move is designed to make life easier for trustees, it will also increase the competition IFAs face, as other professions will be able to take over their duties.
Flipping the coin, it could also prove to be an opportunity for advisers who previously haven't been able to advise their clients on investment products.
The government also suggests there should be a relaxation of the conditions under which an unathorised trustee can invest in certain exempt products.
Currently, unauthorised trustess are only allowed to invest in private equity limited partnership "in accordance with advice given by an expert". That means they cannot do so if the adviser does not recommend it.
However, the Treasury has now suggested scrapping this rule and instead allow trustees to invest without the consent of their adviser as long as they have obtained and considered the advice given. That could see IFAs lose some of their current responsibilities as well as some of their business.
The Treasury believes this is a risk worth taking as scrapping the current rules would help pension fund trustees to engage more actively in the investment process, reduce the inconsistency between FSMA and current pensions legislation, as well as avoid discrimination between different asset classes.
Defending the changes, it also adds the new Pensions Bill soon coming into force will provide some safeguards against poor decisions.IFAonline
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