The FSA may extend to other retail markets the practice of requiring advisers to justify recommending a product with higher charges compared to a more basic vehicle.
The practice is currently used in pensions under a rule known as RU64.54. When recommending any pension other than a stakeholder, advisers must explain in writing why the policy is ‘at least as suitable as a stakeholder pension'. The regulator rebuffed accusations in its recent discussion paper on product intervention that RU64.54 has a negative market impact by creating a price cap that has dragged down pension sales. It says it may extend the practice to other product areas, potentially forcing IFAs to prove in writing why a more expensive product is better for a client than one ...
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