IFA networks are facing a legal fight with the Professional Sales Association over claims they are using “bully-boy” tactics used to exploit members.
The PSA, a section of Manufacturing Science and Finance Union, the UK's fifth largest with more than 400,000 members, is considering a legal action against IFA networks in a bid to stamp out fee hikes without consultation and the freezing of commission payments when members reject new contracts.
The union says it is planning to take the action to prevent any other networks following the lead of M&E Network which last month hiked members fees by £1,500 over PI insurance without prior consultation.
It wants to see changes in the law, saying IFAs are being exploited by having new contracts forced upon them without being involved in the decision making process.
And it is calling on the FSA to look into the tactics used by networks to deal with rebellious minded members such as the freezing of commission payments for three months while a member serves out their notice to quit.
The PSA has refused to confirm what form any legal action will take but says the main aim is to force networks to compete for members through the quality of their costs and services.
PSA national officer Dave Parsons says: “The FSA should take note of the bully-boy tactics of IFA networks. The financial services industry can ill-afford another scandal.
“The PSA is encouraging all network members who face such bully-boy tactics to get in touch. We are considering a legal challenge to this abuse.”
But networks have hit back and defended their operations.
M&E Network managing director Simon Hudson says: “As far as I'm aware networks like ourselves do not hike fees without due notice.
DBS public relations manager Sue Lewis says: “We believe DBS is highly member focussed and our consultative approach over the last 18 months has been well documented.
“In today's environment customer service is king and there is no reason why this should be any different for networks.”