Advisers have welcomed the FSA’s guidance on distributor-influenced funds, which aims to manage conflicts of interest associated with the products.
The guidance this week says firms that advise on Difs after the RDR should not get a share of the annual management charge for their role on a Dif governance committee and adviser charges should not be “inappropriately” different from other competing retail investment products. It reiterates its stance that advisers will find it difficult to recommend Difs and meet RDR requirements for independent advice.
Brunning Newman Houghton director David Brunning says: “We need a level playing field, otherwise the temptation is to recommend funds that better suit the firm not the client.”
AWD Chase de Vere head of communications Patrick Connolly says: “It is only right that these conflicts of interest are managed.”
The regulator is consulting on rewording its Difs factsheet and has highlighted key areas it is looking to change.
The new factsheet says avoiding capital gains tax liability may not be a good enough reason for recommending Difs to some clients as they could instead benefit from making use of their annual capital gains allowance each year.
It also questions what advice tied or restricted advisers who only recommend Difs will provide if the product is not suitable.
Atkinson Bolton Consulting is considering launching a second distributor-influenced fund and is looking to market its existing Dif, the £40m thoroughbred core alpha fund, externally.
Goodchild says: “We intend to remain independent after the RDR. We will look at how the new FSA guidance on Difs affects us.”