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FSA accused of bias against advisers

Aifa hits back after mystery-shopping shows widespread failings

Aifa director general Chris Cummings believes that the FSA’s latest mystery-shopping exercise shows blatant bias against advisers and tars them with the same brush as banks and tied advisers.

The regulator has comp- leted an investigation into how a sample of 50 firms of all sizes are adapting to its treating customers fairly regime.

The report, which fails to distinguish between different categories of firms, indicates deep-rooted comm- ission bias and glaring def- iciencies in advice.

According to the report, one-third of advisers which claim to be independent do not offer a genuine fee option while two-thirds of firms are failing to provide adequate explanations of risk to customers.

The FSA claims that less than a third of advisers from the firms surveyed provided non-commission-earning advice such as recommending debt repayment before recommending other investment products.

It says almost all firms claimed to offer a full advice service but only a third of firms undertook a full review of customers’ needs and objectives.

Half the firms that did offer fees discouraged customers from taking the fees option, says the FSA.

The regulator has warned that companies that have failed to make progress on TCF by March next year could face enforcement action.

But Cummings says: “I am shocked and deeply disappointed at this blatantly biased research which is targeting IFAs when we know from conversations with the authors of the report that the main culprits are banks and single-tied firms.

“This is lowest-common-denominator tar-brushing of retail financial advisers which will mislead consumers. I am deeply worried by the message that the FSA is putting out about financial advisers.”

Last month, the financial services consumer panel accused the advice sector of commission bias and set out plans for an alternative payment system to replace commission.

FSA spokesman Dave Whitely says: “Progress is being made across the industry but we will soon lose patience with firms that are not making any progress and will deploy our full range of powers against them.”

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