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Caps that do not fit and letters that must be writ

No one is ever going to get rich quick while working as an IFA. This is certainly true of those looking to deal with stakeholder pensions, within whose 1 per cent cap thousands of IFAs have quietly believed the price of their advice would not fit.

So what a relief when Misys gave its public backing to IFAs who sell stakeholderesque personal pensions with the added flexibility of an annual management charge up to 0.5 per cent over the 1 per cent stakeholder cap.

Through its four networks, Misys is speaking out to the beleaguered IFAs who believe no amount of streamlining, e-enabling, worksite marketing and financial educating of clients will allow them to make a buck within 1 per cent.

This could be music to the ears of many and has promp-ted life offices to go on record in favour of IFAs who want to call the shots when it comes to commission.

Misys, with its four-strong stable, this week stuck its head above the parapet and told its 5,000 members they have its blessing to operate above 1 per cent in the post-stakeholder world.

Misys says its advisers can opt for stakebuster so long as it&#39s fully disclosed and exp-lained in the reasons why not letter and as long as adv-isers don&#39t exceed a 1.5 per cent AMC.

Misys also says its advisers can charge a fee up to the 1.5 per cent. This is seen as a much less controversial move because it fits with what pensions minister Jeff Rooker has said in the past anyway. This is a far cry from the FSA&#39s reasons why not letter which demands IFAs have to write a separate letter if they fail to recommend stakeholder.

The Government believes IFAs should be forced to go the extra yard if they don&#39t recommend the naturally better choice of stakeholder and justify their choice.

The very public move by Misys flies in the face of the climate of fear the Government seems to want to create for those IFAs who dare not recommend stakeholder.

Many IFAs will take this support warmly, feeling the the burden of guilt of pricing advice over and above the 1 per cent rule has been lifted from their shoulders.

The individual networks which make up Misys IFA Services – Kestrel, Countrywide IFA, IFA Network and Financial Options – are also recommending new policies be placed with one of the networks six preferred stakeholder providers. These are Axa Sun Life, Clerical Medical, Norwich Union, Scottish Amicable, Scottish Equitable and Scottish Widows.

These life offices also use mono-charging, which Misys says allows adjustments to the AMC.

Misys IFA Services sales and marketing director Max Wright says: “When it comes to remuneration to IFAs for advice given to clients, this should not be restricted by the Government.

“We are comfortable our members can set out the alternative methods of paying for advice, which will sometimes include fees and sometimes mean charging higher than the 1 per cent stakeholder AMC.”

Misys IFA Services head of marketing Andrew Bedford says: “IFAs are intelligent enough to work out their own costings, which depend on how much work is needed with the client.”

This move could be the public support some IFAs have craved for but it is not without risks. Torquil Clark pensions development manager Tom McPhail says: “As part of the bigger picture, it is very ambitious given the way charges are free-falling at the moment, with Barclays zero-charging stakeholder.

“There will be more pressure brought to bear on commission levels, but there is still a willingness among product providers to subsidise IFA commission which can&#39t last much longer.”

But it&#39s not clear that the move won&#39t muddy the waters on stakeholder in terms of what the public understands the new pensions do and how much they can expect to pay for their pensions, including advice, in the 1 per cent world.

Perhaps unsurprisingly, DBS gave the move a cool reception, in part because of the consumer confusion which might arise.

Spokeswoman Sue Lewis says: “You will have to be very careful the charges are absolutely upfront and clear. The regulator might be concerned with this.”

McPhail says: “It could be blurring the picture. Some of the virtues of stakeholder are its transparency and simplicity, so if advisers are being encouraged to sell pensions with stakeholder characteristics which aren&#39t stakeholder then it might get confusing.”

So what does the regulator who bought you reasons why not letters have to say about the strategy? Financial Services Authority spokesperson Jackie Blyth says: “We don&#39t want advice forced down people&#39s throats. If a non-stakeholder is recommended, it needs to be made clear in the reasons why letter why the choice was made instead of stakeholder.”

This is something Misys has been very clear on from the outset.

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