Skandia says the FSA should consider bringing in a best advice requirement for wrap platform providers that attract advisers by offering share incentives.
Head of platform marketing Peter Jordan believes that incentives offered by independent platform providers can lead to a conflict of interest in the advisory process and interfere with an adv-iser’s ability to conduct due diligence.
He says the source of adv-iser income needs to be disclosed when an adviser is dealing with a client. Jordan says: “It clouds the judge-ment of an adviser when it comes to due diligence.
“Maybe it is time for a best advice requirement, where the provider has to show clearly and demonstrably that they offer a better service than other providers.”
Jordan considers that the light-touch regime whichhas been taken by the FSA so far has allowed incentive schemes to develop.
He says: “If we set up a pro-fit-sharing option, we would have to declare it and prob-ably would not be able toget away with it.”
Jordan also says advisers should consider the secur-ity implications of using a smaller platform which outsources its IT system infrastructure to third-party firms. He says some providers do not hold computers or data connected to the platform in their own offices and this could present a security risk.
He says: “When you look at the firm, you have to ask, what is the integrity of the technology? Where does the hardware come from? Bigger organisations with inhouse systems are in a stronger pos-ition. Smaller org-anisations have less infrastructure and do not always provide theIT themselves.”