Regulator warns IFAs of consolidation conflicts

22 october 2009 | By Tracey Scott

The FSA has written to small IFA firms warning that if they are joining an IFA consolidation vehicle to leave the market they must ensure that the new solution is suitable for all clients and beware of conflicts of interest.

In its latest small firms’ newsletter, the regulator warns that IFAs selling to a consolidator must manage potential conflicts brought about by the buyer’s business model, including transparency over any inducements to advisers to recommend particular products or platforms.

The newsletter says: “Typically, the consolidator firm will put the adviser firm’s customers on to a wrap platform for ongoing servicing and the client bank at a later date. This appears to be a growing trend in the financial adviser market in particular. A number of these consolidators are not regulated or supervised by the FSA. We would like to remind firms they must continue to act honestly, fairly and professionally in line with the clients’ best interests.”

The regulator says firms should ensure they continue to treat customers fairly, explain additional costs and ensure that added value for the IFA is not to the disadvantage of the customer.

Finance and Technology Research Centre director Ian McKenna says: “This is another nail in the coffin of the argument that you can have a single wrap platform.”

Succession Advisory Services chief executive Simon Chamberlain considers that conflicts of interest will only arise if IFAs are getting paid extra money from a platform to transfer assets.

He says: “The FSA does not want to see a mass transfer of funds for the sake of it. They want each client to be treated individually.”

Financial Inspirations chief executive Garry Heath says: “There is absolutely no value in a consolidator disrupting the relationship with the adviser and his clients because that is the value that the consolidator is buying.”

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