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FSA probes advice on cashing in WP

The FSA is running an investigation into the with-profits sector amid fears that advisers are not knowledgeable enough to advise clients on whether to cash in policies.

The regulator says it has received anecdotal evidence of poor advice and a failure to move beyond the dogma that open funds are good, closed funds are bad. It adds that some firms are reluctant to advise customers to leave a with-profits fund because they could be accused of churning.

The concerns were first raised by FSA industry sector leader David Strachan during a speech last November.

He pointed to one adviser asking whether he was expec- ted to understand the with-profits policies he had been advising on for 10 years and another recommending a policyholder stay in a closed with-profits fund based on the rationale that, as a closed fund, the provider firm would not be liable to misselling compensation costs.

FSA spokesman Joseph Eyre says: “We have received anecdotal evidence that it is not easy to find advice on this subject as few advisers are proactively engaging with customers to deal with their with-profits investments.”

Lowes Financial Management managing director Ian Lowes says: “Clients also have a duty to come to us. There is a degree of subjectivity which makes the job very difficult for advisers. There are also many clients that are not prepared to accept the surrender value net of the MVR.”

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