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Bidding war fear over better than best rule

The FSA&#39s scrapping of the better than best rule will spark a bidding war among providers desperate to ensure they are not left behind in the dash for distribution, claim IFAs.

The FSA says it abolished the rule, which effectively limited provider investment in adviser firms to 10 per cent, so commission-based IFAs wanting to retain their independent status could access more capital to finance the transition to fees.

But advisers claim the move will simply “sow the seeds of chaos” and prompt providers to table over-inflated offers for firms in their rush to secure control of the major distribution channels.

They are also concerned that the FSA may have paved the way for providers to create direct salesforces by the back door as those with controlling stakes in IFAs seek to retain their initial investment.

Simpsons of Brighton IFA partner Andrew Merricks says: “Providers will be paying very high prices for distribution and will want to make their money back. The FSA is rearming prov-iders with the tools to go back to a direct salesforce-type system.”

An FSA spokeswoman says: “Under the defined payment system, there should be no conflict of interest. We are trying to ensure the IFA sector remains a robust part of financial services.”

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