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Aifa presses FSA for basic rethink on DP plan

The FSA is reeling under the weight and clamour of the response to the CP121 consultation, with over 500 replies. Here and on pages 9 and 10, we publish some of the industry points that have been made

Aifa is calling for a fundamental rethink of the FSA&#39s defined-payment system proposals set out in CP121.

It has branded the defined-payment system as impractical, bureaucratic and likely to lead to a significant reduction in the number of IFAs.

Instead, it is proposing a menu option where IFAs would inform clients up front about product options and the cost of remuneration to reassure consumers that there is no bias.

It is also concerned that the FSA&#39s response to the small amount of commission bias detected is not proportional to the problem it is intended to solve. It argues enforcement action against those few guilty of biased recommendations is more cost effective than an attempt to restructure the market.

Aifa director general Paul Smee says: “There is more to independent advice than the method of remuneration. In particular, there is freedom from any contractual tie between adviser and provider and access to the whole market. We agree that IFAs must be open about their remuneration and should offer a choice of payment methods including fee and commission.

“This is a less one-dimensional approach to independent advice than appears in CP121. As currently drafted, the FSA&#39s defined-payment system does nothing to address the Government&#39s concerns over the savings gap. In fact, they might make it worse.”

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