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Fee-based IFAs escape market requirement

Fee-based IFAs will not have to demonstrate how their charges compare with the market average.

The FSA says because firms charge fees in a variety of different ways, a meaningful comparison of rates to the market average is not a viable proposition to help consumers understand pricing.

It argues that commission is more directly related to the type of investment, its term and the amount invested but fees can be worked out from any number of bases.

Fee Based Advice sales director Nick Peters says it would be difficult to compare the pricing structure in one fee-based firm with another and believes it is up to the consumer to feel they are getting value for money.

But he says the regulator needs to be careful because some companies that are charging fees are not, in his view, true fee-based advisers.

He says: “It depends how far the firm has crossed over into true fee-based advice. Some companies charge fees but this is little more than a reworking of their commission.”

FSA head of retail projects says David Severn: “The menu will give consumers an up-front indication of the cost of advice, whether that cost is met directly by fees or indirectly through commission, or a combination of both.

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