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Lower tier of advice &#39could harm clients&#39

The defined-payment system is an unnecessary intervention in the market, according to specialist ethical investment IFA, the Global and Ethical Investment Advice Partnership, in its response to the FSA&#39s CP121 paper.

The Gaeia Partnership has questioned why the FSA has failed to publish any research into the difference, if any, between the types of products and providers recommended by feeand commission-based advisers.

The firm says it generally recommends similar products, whether being paid by fees or commission.

It recommends the retention of the better than best rule as the simplest way to prevent any misselling and warns that providers controlling IFAs could seek to maximise the profitability of the relationship by promoting sales of their own products.

The Gaeia Partnership also argues against the introduction of a lower tier of advice in a differentiated advice structure,as people&#39s finances can often be complex, even if they have little money. The firm warns there could be dangers in allowing an adviser with limited knowledge to advise the more vulnerable in society as it believes they should be regarded as needing a greater level of help.

Senior partner Brigid Benson says: “It is not clear how the proposals will close the savings gap. Too much change, increased regulation and bureaucracy will only serve to reduce the number and effectiveness of advisers whose help the Government needs to achieve its goal of encouraging people to save more.

“It is complex rules, regulations, endless quotations and procedures that make advice expensive and receiving it often tedious and intimidating for older and less educated clients. We believe it would be more efficient to cap commission and focus on supervision to protect clients.”


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