In a policy paper published last week, Aifa says re-establishing law of agency would help to restore consumer trust in financial services.
It argues that 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.”
The Red House director Gareth Marr supports Aifa’s proposals, as long as IFAs can prove they do not take any form of payment from product providers.
Marr says: “If IFAs can prove they only receive payments from clients, then I think a regulatory dividend is a good idea. It would dramatically boost consumer confidence in independent financial advice and would increase adviser confidence in the quality of the service they are offering and the value of advice.”