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IFP wants payment letters to be compulsory

The Institute of Financial Planning is urging advisers to provide their clients with a letter of engagement before offering advice.

The letter would explain to clients if the IFA is being paid by fees or commission.

The IFP is urging the regulator to make such a letter compulsory as part of its forthcoming review of the disclosure regime.

It claims that consumers&#39 understanding of what they are investing in would be improved if they were clear about how their adviser is remunerated for their services. It says the letter would make clear exactly what the adviser is being asked to do and how much and by whom they are being paid to do it.

IFP chief executive Nick Cann says: “All the issues that currently confuse the client would actually be highlighted and signed by both parties to the arrangement. The whole issue of fees and commission can get lost in the paperwork that is sent out.”

Aifa director-general Paul Smee says: “It is an interesting idea. I am fully in favour of disclosure. I doubt that it is the whole answer. I would suspect that status of the adviser is more important to the consumer.”

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