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Advisers on fee alert

IFAs are breaking the FSA’s depolarisation rules and failing to provide an adequate fee option to their customers, say the two biggest IFA bodies.

Aifa and the Personal Finance Society are warning their members to ensure the fee option is embedded in their business if they want to operate under the IFA banner or risk FSA enforcement action.

Personal Finance Society head of public affairs John Ellis claims that some IFAs have ignored depolarisation and are just nominally offering a fee option while relying on commission as before.

Aifa director general Chris Cummings says although these firms are not deliberately passing themselves off as IFAs, many are still unaware of the FSA’s depolarisation requirements two months after they were introduced and have effectively just ticked the fee option box to retain indepen- dent status.

Charging inflated fee levels or hourly rates to put off customers or presenting the fee option in an unfavourable light in discussions with clients would fall foul of FSA rules.

Ellis believes the number of IFAs may drop considerably as firms fall foul of the FSA and are forced to become whole of market advisers. He says: “I have seen little evidence that depolarisation has caused IFAs to adapt their propositions. These IFAs can expect a sting around the corner. Depolarisation has muddied the picture and we could be faced with an amorphous mass of distributors in a few years time.”

Cummings says: “On the whole, depolarisation has passed smoothly but there is still a lack of awareness among some firms. The FSA is looking very closely at the depth of the fee offering of newly independent firms.”

An FSA spokeswoman says: “Firms have to embed the fee option in their business plan and if they do not, they are obviously not treating their customers fairly.”

Pension Transfer Solutions managing director Carl Melvin says: “Advisers are making up fees as they go along and hoping the FSA does not stumble across them because they do not want to tell their customers that they are not independent any more.”

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