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Aifa wants to reward advisers who use law of agency principle

The Association of Independent Financial Advisers is calling for the “law of agency” to apply under the retail distribution review, with regulatory dividends for advisers who act on behalf of their clients.

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.”


Commodity comeback

The commodity boom does not appear to be over and some believe that the falls in the autumn were simply a breather before entering round two of the bull run. Lately, the price of industrial metals has been creeping back up while recovery has been seen in numerous commodity-related stocks.

On guard

Let’s consider the global economic problem in a few statements – low interest rates, lax regulatory control and a proliferation of financial engineering (once referred to as innovation) in the banking industry. Add these together and they have all allowed people and governments to borrow beyond their capacity and for the financial sector to be overvalued relative to loan exposures.


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