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IMA warns of over simplifying advice process

The Investment Management Association says the FSA’s proposals in the retail distribution review could over simplify the advice process and could increase the risk of misselling.

But it says the FSA is right to address commission bias within the current advised market.

IMA chief executive Richard Saunders says: “The concept of offering a range of simple products backed by simple advice has been tried before without success. It risks creating an un-level playing field which will work against more transparent products such as funds.”

The IMA are warning the FSA against relying on retail banks as the main distribution route.

Saunders says: “Even a simple product can be missold and we are concerned that certain types of distributors, and therefore products, may be favoured in a mistaken belief that the product being sold is ‘simple’.”

Saunders is also calling on the FSA to use the RDR to tackle the issues of commission bias and misselling.

He says: “We should not shy away from accepting that commission driven misselling is a reality in the retail market. I would urge the FSA to consider how to tackle this directly.”

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