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FSA looks at DP alternatives

The FSA is actively considering alternatives to the defined-payment system as it examines the practicalities of implementing the CP121 regime, including a cost-benefit analysis, according to managing director John Tiner.

Tiner&#39s comments, made at the LIA&#39s annual conference in London last week, come as FSA head of polarisation David Severn is known to have told a group of industry figures that the defined-payment system outlined in CP121 has only a 50-50 chance of surviving.

Eighty per cent of delegates at Money Marketing&#39s G80 Conference last week said they believe the DP proposal would be reformed.

In the latest attack on the DP system, the Financial Services Consumer Panel has called it an “unnecessarily complicated system” in its response to CP121.

In his speech, Tiner also said the current polarisation structure acts as a barrier to smaller players succeeding in the market, a claim rejected by smaller fund managers.

He said the industry is suffering from product innovation which has resulted in confusion for consumers. Innovation must be focused on designing simpler products rather than just new ones, according to Tiner.

The FSA wants consumers to benefit from competition rather than the benefits resting with the middleman, he claimed.

Tiner said: “We put forward the defined-payment system as a way to tackle commission bias. We are now looking at a cost-benefit analysis and the practicalities of implementing it. A lot of alternatives have been advanced and we are looking at the DP system very seriously and taking into account the many ideas that have come forward.”

Artemis managing director Jamie Campbell says: “Tiner is being economic about the actuality. Polarisation has created a very vibrant independent sector which means that new and small provider entrants, if they offer products of good quality, have an automatic market to approach.”

LIA director of public affairs John Ellis says: “There are visible signs that the FSA is reviewing the DP system.”

LIA Conference, p10;

Comment, p35

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