The Defined Payment System has been scrapped in favour of Aifa's Menu approach to the remuneration of IFAs, the FSA has announced today.
It had been known for sometime the regulator has been minded to drop its proposals in the face of massive opposition, but until now it had not decided between Aifa's proposal and the Sandler review team's alternative.
The system will still be called DPS, but crucially, it will allow IFAs to be paid through commission.
The menu will be a document presented to clients in the early stages of the sales process. It will outline the services offered by the IFA and the options by which clients can pay for advice.
There will be a consultation on draft rules for the option next year.
The regulator is aiming at expanding it across all channels rather than just for IFAs.
FSA head of retail projects David Severn says: “Some constructive proposals came forward in the responses to CP121 and, of those, the “menu” option offers the best route for us to achieve our objectives. Importantly, it will ensure that the form and level of adviser remuneration – and scope for negotiation – is signalled to the consumer up front.”