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&#39DPS would have harmed IFA sector&#39

The FSA was forced to adopt the menu system over its defined-payment system because of fears that the market would be damaged if it delayed its decision, says chairman Howard Davies.

Testifying before the select committee, Davies said the FSA accepts that too few people are willing to pay fees for independent advice and it would have been damaging to the IFA sector to proceed with the DPS.

He said many providers were busy second-guessing the outcome of the depolarisation review. He also claimed people were reacting negatively to CP121 because they disagreed with the DPS.

Davies said the FSA board is meeting this week to make its final decisions about polarisation and draft rules will be announced soon. There has been speculation that the rules may be published as late as Christmas Eve.

He insisted there is a growing body of opinion which agrees with depolarisation to some degree.

Davies said: “The effect of the DPS has been that the market was potentially being damaged the longer it did not know what was going to happen.”

Timothy James & Partners director Rob Guy says: “These comments are sensible as a lot of firms have been busy buying up distribution without knowing the outcome of the review.”

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