Product providers should be allowed to invest in IFA firms, which would solve many of the financial problems facing them says the UK's biggest life office.
Norwich Union sales and marketing director Peter Hales sees a problem of under-capitalisation in the IFA sector. He believes the FSA should relax regulations which stop providers taking bigger stakes in IFAs.
Hales said IFAs could expand, invest in technology and compete more effectively with other distribution channels. The main stumbling block is that IFAs' independence might be compromised but Hales says if four to five providers were allowed to take small stakes in an IFA this would not be an issue. Current regulations restrict providers from taking more than a 20 per cent stake in an IFA firm.
Aifa director general Paul Smee says: “The key objective must be to keep the independent brand and this would not be an easy task if providers invested in IFAs but that is not to say the proposition should not be carefully considered.”
An FSA spokesman says: “Where a connected product provider holds 20 per cent or more of the shares, special safeguards apply to ensure that firms' products are offered to clients only if they are the best in the marketplace.”