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FSA to investigate IFAs&#39 ability to advise on retail property funds

The FSA is to investigate the quality of IFA advice on retail

property funds and buy-to-let properties.

Speaking to delegates at the Schroders Property Conference in London

last week, outgoing FSA chairman Howard Davies said the regulator had

a number of concerns about consumer and adviser understanding of

property funds.

He questioned whether IFAs&#39 knowledge, understanding and

sophistication has kept pace with the growing product complexity.

He claimed the FSA has seen examples of IFAs with a limited knowledge

of the property market actively advising on schemes. There may be a

case, Davies said, for IFAs to be obliged to take formal training

through a body such as the Royal Institution of Chartered Surveyors,

to equip them with the necessary skills to sell prop-erty funds.

Davies identified three specific risks that IFAs should be aware of

in the commercial property market.

While the concept of residential property investment is familiar to

many, he said the complexities of a packaged investment product such

as property funds may not be so transparent.

Some schemes market themselves as low risk because they rent out

properties to so-called “bluechip” companies but Davies said in

today&#39s climate a “blue-chip” firm could be the next high-profile

corporate failure.

He said the regulator remains concerned about the buy-to-let market,

with many owners having to rely on the investment performance of the

property rather than rent to make mortgage payments.

Davies said: “What we are looking at in this project is the nature of

property funds currently being marketed, the information available

about those funds, the risks in each category, and the extent to

which financial advisers understand and properly advise on this type

of investment.”


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