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&#39Dumbed down&#39 advice worries trade bodies

IFA trade bodies are united over concern that Sandler&#39s proposal for the introduction of a dumbded down advice will result in mass misbuying through unsuitability, although they support the thrust of his defined payment proposals.
Aifa, Sofa and the LIA have all underlined the potential for a wave of claims against distributors in the future as consumers find out products they bought become inappropriate as their circumstances change.
Under the Sandler&#39s proposals there is no need for an adviser of “stakeholder” or catmarked products to prove its suitability.
They believe the potential risk to consumers and to the reputation of the financial services sector will outweigh the benefit of more products being sold.
But the trade bodies have given a cautious welcome to the report&#39s conclusion that the FSA&#39s CP121 defined payment system is too restrictive and should allow payment for advice to be contingent on a sale.
They have also supported the proposal that the use of the word “adviser” be exclusive to IFAs.
Aifa director general Paul Smee says: “I don&#39t like the idea of these non-toxic products and I am not sure there is any evidence consumers want them. You can feel the complaints coming and that worries me.”
LIA public affairs director John Ellis says: “What will this lower tier of advisers do for standards in the industry? We scrap Know Your Customer and clients are asked to sign a piece of paper saying they know what they are buying. But this seems too radical in light of the standards we have achieved so far.”
Sofa chairman John Porteous says: “Sandler has extended an olive branch to the IFA sector by drawing a distinction between advisers who are independent and distributors. These proposals are more palatable than CP121.”

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