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FSA claims trees take place of IFAs

The FSA admits the 1 per cent cap is damaging the IFA channel by cutting income and driving advice out of the market.

It says the cap for stakeholder and Cat standards “is leading to a squeeze on revenue in cash terms per sale” for IFAs.

This follows the decline in direct salesforces, “consumer demand for independent advice” and the “need for advice, increased by greater product differentiation”.

The FSA says “many IFA businesses are growing weaker as revenues are squeezed in the 1 per cent world”. It says decision trees and comparative tables have been a double whammy for IFAs, removing the need for advice and putting pressure on margins.

Fund supermarkets are also leading to “consumers making their own buying decisions rather than relying on advice”, effectively making IFAs redundant it claims.

Jamieson Financial Management principal Bruce Jamieson says: “IFAs would have survived 1 per cent. It is ridiculous to suggest decision trees and comparative tables are replacements for IFAs. The consumer gets poor-performing products which cost less.”

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