Stronger systems and controls are needed to limit conflict of interest issues arising from distributor influenced funds (DIFs), Tisa has said.
An independent report commissioned by Tisa said some firms need to introduce new checks and balances in order to address the potential for bias and "inherent" conflicts of interests when operating DIFs.
The report follows Tisa's establishment of an executive committee to review the market on the back of FSA concerns.
Although the report said issues arising from Difs can be addressed within the existing regulatory framework, it also said in some cases distribution firms will need to modify their processes and arrangements or introduce new systems and controls.
Subject to various checks and balances, it said an IFA should be able to sell a DIF in the post-RDR world. These checks should also apply to "vertically integrated" models offered by bancassurers, insurers and fund managers, it said.
The report went on to highlight several areas it deems essential for good consumer outcomes: straightforward product design, clear branding, transparent pricing, fee justification and performance disclosure.
It added the system as a whole would be more "robust" if regulated entities were solely responsible for the structure of products.
Tisa's report also recommends the funds be called distributor funds rather than distributor-influenced funds, which implies bias, although it stops short of calling for a definition in FSA rules.
"The overriding aim of this review is to ensure that distributor funds provide positive consumer outcomes," said Tisa director general Tony Vine-Lott.
"To achieve this we need a distributor funds market that operates compliantly and effectively for the benefit of all parties - one that allows product providers to devise effective and appropriate solutions to meet a variety of clients' needs."
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