Networks have thrown their support behind the Tax Incentivised Savings Association’s independent review into distributor-influenced funds.
Last week, Tisa announced it will facilitate the independent review as part of its project to deliver an industrywide solution to the concerns surrounding the funds’ suitability and charges.
A Tisa executive committee, to be chaired by Sanlam non-executive director Paul Bradshaw, has been established to investigate how Difs are being used in practice, what is nee-ded to deliver positive consumer outcomes and to identify what regulatory best practice would look like.
An external agency with regulatory affairs experience will then be asked to carry out an independent review and provide a report by the end of May.
Tisa says funding for the review will come from executive committee members.
According to the FSA’s Retail Conduct Risk Outlook 2011, published last week, there are at least 40 firms offering Difs to their customers, with around £2bn of assets under management and 10,000 customers with assets invested.
The regulator has identified two key risks associated with the funds – conflicts of interest and the complexity and levels of charges.
AWD head of communications Patrick Connolly says AWD is not in favour of Difs and believes they are a risky product.
He says: “There has always been a risk that they can be sold when they are not appropriate to the client. The client should be using a product that is right for them and if this investigation goes some way to ensuring this outcome, it can only be a good thing.”
Openwork chief executive Martin Davis says: “Difs can certainly be used in the wrong way and if that is happening, it should be stopped and Tisa should be supported in this. When they are sold correctly, they can be very valuable.”
Tisa director of policy Malcolm Small says: “Many advisers are looking to change their business model in response to the retail distribution review and this is likely to lead to an increased use of Difs.
“It is therefore vital that we identify the standards that all participants need to meet in order for these funds to achieve their potential to produce good consumer outcomes.”