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FSA is making IFAs scapegoats, says MP

‘We are concerned about the fragmentation of advice. There is a whole series of questions’

The Treasury select committee has attacked the FSA for backing product providers over IFAs and leaving advisers as scapegoats for misselling.

Committee member and LibDem Treasury spokeswoman Susan Kramer criticised FSA chairman Callum McCarthy and chief executive John Tiner for fragmentation in the regulatory advice framework since depolarisation and suggested that the system could be “breaking down”.

Kramer cited the example of Money Marketing’s No Advice, No Protection campaign and other areas where consumers were likely to be confused by the patchwork of regulation that includes execution-only, full advice, multi-ties, generic advice and basic advice.

Kramer said advisers have been made scapegoats for endowment and other misselling issues. She cited the Seymour v Ockwell case, where Zurich had to pay two-thirds of a claim over misselling an investment product, and evidence of providers charging in excess of Lautro commission rates as reasons why product providers should be picking up more of the costs of compensation.

Tiner said that the FSA had a project in place to look at where these responsib- ilities fell.

McCarthy said he was pleased that traditional channels of advice are being challenged by new entrants, creating opportunities and a more vibrant market. But Kramer responded by saying that, rather than choice, the regime has led to confusion.

Kramer said: “There is concern that the strategy is behind the providers, so IFAs are made the scapegoats for misselling. IFAs are a key part of the process and many small ones are under threat.

“We are concerned about the fragmentation of advice. There is a whole series of questions that need to be addressed, such as Money Marketing’s No Advice, No Protection campaign, showing real issues of concern.”

Tiner said: “We have a pro- ject in place to look at these responsibilities. It is unhelpful for providers to step away but we do not accept that compensation has come from the wrong place.”

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