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‘Market averages use wrong figures’

Aifa director general David Severn has complained to the FSA that its estimates for market averages of advice are wrong.

Severn believes that the FSA has estimated the average cost of advice wrongly and is asking them to look again at the figures.

Under the menu option in the depolarised market, IFAs will have to list all market averages for advice on products that they sell to compare them with their own prices.

The menu, which was created by Severn’s predecessor as director general, Paul Smee,was designed as a response to Treasury demands for transparency in fees and commission.

Last month, IFAs told Aifa that they intended to maintain maximum levels of commission across the spectrum of products. Aifa argued that FSA data collection for annuities and single-premium pensions need reviewing.

Much of the menu’s effectiveness as a comparative pricing tool will depend on the accuracy of the figures used. If the market-average pricing were set too low, it would make many intermediaries look comparatively pricey.

Severn says: “We have written to them to let them know that we think they should look again at the way they have drawn up these market averages.”

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