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Aifa claims CP121 proposals could stifle innovation

Aifa says the FSA&#39s proposed reform of polarisation will create competitive distortions which will fatally weaken the competitive stimulus of the market.

Aifa says the existence of a strong, competitive, independent distribution arm enables new providers offering innovative products to enter the market without the cost of controlling their own distribution.

Without independent distribution, entering the market would be much more difficult, particularly if the costs of acquiring distribution rose, argues Aifa.

It says many product innovations over the past decade have originated from pressure brought to bear on providers by IFAs.

In its submission to the FSA, Aifa says it is “broadly supportive” of the intention to allow providers to invest in IFA firms. It argues a lack of capital has hampered the growth of many firms and believes a growing IFA sector is good for consumers as it remains an extremely cheap route for the distribution of financial products.

Aifa says it supports IFA firms which are contemplating adopting more than one status under the proposed new arrangements although it says it cannot see how individual advisers can hold dual status. Aifa says this would confuse consumers and undermine the integrity of the adviser.

It is calling for a clear distinction between distributor firms which are contractually linked to a limited number of providers and those which recommend products from the whole market, rather than the current suggestion of auth-orised financial advisers.

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