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Menu system may level distribution disclosure

Industry experts claim that Aifa&#39s menu system will force tied distribution to operate on an even playing field with IFAs and could lead to more companies reviewing the future of what is left of direct salesforces.

According to the full menu proposals put forward by Aifa and adopted by the FSA this week in preference to the defined-payment system, tied salesforces could be compelled to provide up-front “commission equivalents”, taking in not only commission but the cost of other factors such as office support, company cars and marketing.

It would allow consumers to make informed choices across different distribution channels. Currently, tied salesforces have to disclose commission equivalents but further down the sales process.

LIA head of public affairs John Ellis says: “This will be a big challenge for companies operating tied salesforces and branch advisory services. It treats them as arm&#39s length IFAs which they are not. It swings the balance towards IFAs and it could lead to more salesforces being disbanded.”

Zurich Advice Network franchise development director Dave Seviour says: “The decline of the IFA will not be anything like what was predicted. The question is whether commission equivalents adds value for the consumer. We hope they do not change the way it is calculated.”

Barclays spokeswoman Emma Keens says: “Anything that provides clarity to consumers is a good thing. We are in consultation with the FSA and it is too early to say what impact it will have.”

FSA spokeswoman Louise Buckley says: “We are attracted by the possibility of applying the menu approach across the market but we would have to consult on it first.”

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