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Define business to avoid &#39remedies&#39

Is defined payment the weakest link in the FSA&#39s CP121 proposals? It appears so. Managing director John Tiner says the FSA is considering other options. David Severn apparently puts its survival at 50-50. At the G80 conference last week, 80 per cent of those present believed it would be modified. And we hear the Treasury&#39s reviewer-at-large Ron Sandler, has serious concerns.

Perhaps the most vexatious of the FSA proposals will be dropped. So are IFAs out of the woods? No. The FSA is still obsessed with commission bias and will try to do something about it and the vocabulary of the argument is still unfavourable. IFAs in the FSA&#39s eyes are still greedy middlemen so something equally unpleasant may follow. CP121 remains flawed in many of its assertions. The FSA needs to take an honest look at its own numbers. If IFAs have a much greater market share -some insurers put it at half, if IFAs rebate a large proportion of that commission, if polarisation actually encourages new entrants then remedies based on CP121 will be curing problems that do not exist and missing problems that do.

But at least IFAs may, and we stress, may, have a choice between staying independent or multi-tying rather than opting for pseudo independence as an authorised adviser.

We hope, as always, they choose independence. But if the threat of defined payment is lifted, IFAs should learn from the fact it was nearly introduced and broaden their income streams to include more trail commission and fees and wean themselves off reliance on up-front commission. Then IFAs will be better able to withstand the next “remedy” put forward by regulator or reviewer.

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