In a policy paper published today Aifa says the re-establishment of the law of agency would help restore consumer trust in financial services.
The trade body argues that those firms that are willing to adopt the principle of being an agent of the client should be given distinct status by FSA and rewarded by appropriate regulatory dividends.
Director general Chris Cummings says: “We believe an IFA is the only true agent of the client. Only an IFA can give true advice as they are legally bound to put the best interests of the client first, and avoid all conflicts of interests.
“Sales representatives, on the other hand, are the agents of the product provider and their job is essentially to sell the products of the provider which they represent.”
Cummings says introducing the law of agency would clarify the distinction between sales and advice for consumers.
He says: “Introduced across the financial services this would help to restore consumer trust by showing the clear legal obligations of all parties.
“We also believe it is important that the disclosure regime allows consumers to comprehensively judge the value of the services offered. In addition we are calling for FSA to review its financial promotions regime to help consumers understand firm’s offerings before they enter into any dialogue.”