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Folkard warning of Govt pressure on pension IFAs

UK consumers could face a wave of misselling from foreign financial services providers right under the FSA&#39s nose, a member of the Financial Services Practitioner&#39s Panel has warned.

IFA Thomson&#39s Group chief executive and panel member Douglas Gardner says the implementation of the Investment Services Directive in January will allow firms from other EU countries to sell into the UK under their home state&#39s jurisdiction rather than that of the FSA.

Gardner, who heads the IFA owned by German bankers AWD Group, feels that UK IFAs and the FSA are not taking the threat of European providers potentially misselling seriously enough.

He says he is particularly concerned that structured product providers will seize the opportunity to sell their products in the UK using direct marketing with minimal risk warnings attached.

Gardner fears the regulator may have its hands tied over taking action, having to rely on other EU regulators to do so.

He says he supports the movement behind a closer European market but believes initiatives such as the ISD and the Financial Services Action Plan have been designed with bigger IFAs in mind, leaving smaller firms struggling to absorb the changes with little support from the FSA.

Gardner says: “There is a real possibility that more unscrupulous companies from other countries will see an opportunity. The FSA is not in a position to do anything about it until it sees misselling happening. All it could do is approach the Government to make changes.”

Regulatory change from two Government departments is likely to put pressure on IFAs doing pension business, according to Axa head of marketing Steve Folkard.

He says the Department for Work and Pensions&#39 Informed Choice project plan to exempt employers from the Financial Services & Markets Act could squeeze margins for some advice models.

Folkard says the plan, which is designed to allow employers to give staff positive recommendations on the benefits of a pension without the need for full regulated advice, could lead to unqualified sales agents carrying out work currently done by registered staff.

In addition, he says the FSA&#39s Treating Customers Fairly requirements will place increasing restrictions on product design and could block high front-end load-style pension contracts.

He says the regulator is forcing providers to pay increasing attention to the principles. Next year, providers will have to show auditable proof that they have been followed in product design and marketing.

The principles include ensuring propositions are developed from the position of customers&#39 needs, that communication is fair and balanced and that consumers&#39 expectations are managed.

Folkard says: “The DWP&#39s proposals for employer advice on pensions may challenge some existing advice models although they will offer opportunities for other ways of operating. Treating customers fairly will mean product designers will have to show products are based on customers&#39 needs and not providers.

“High front-end-load contracts will probably come under challenge unless they can demonstrate that they are in the consumer&#39s interest.”

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