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Advisers may be made to justify their commission

The FSA is to investigate how advice is paid for as part of a wide-ranging review into disclosure.

The regulator&#39s consultation paper, expected in the next four weeks, aims to discuss increasing transparency and provide analysis into the merits of feebased and commission-based advice.

Optimists say the move will help IFAs differentiate themselves from tied or multi-tied advisers.

But there is speculation the regulator may force commission-based IFAs to justify their remuneration in beefed-up reasons-why letters as part of a move to encourage fee-based IFAs.

The consultation paper is set to coincide with the launch of new software from Sofa called the fees toolkit.

The package will help fee-based independent advisers calculate hourly rates but can also be used by commission-based IFAs to monitor time spent with clients and to calculate costs.

Sofa press spokesman Robert Reid says: “I think we should all be offering engagement letters whe-ther we offer fees or not.

“It should not be a problem telling people what we do and what we get paid for.”

At a Treasury select com mittee meeting last week, FSA chairman How ard Davies said: “We have been undertaking research into whether people understand the disclosure reg ime and we have been exploring more meaningful ways to explain to people what costs are.”

FSA spokesman Andy Fleming says: “We are looking to see that consumers understand what they are getting. Clearly, it will looks at things like charges and that will inc lude commission.”

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