The retail investment industry is now facing a Myners-style investigation following attacks on IFA commission and with-profits policies in the Myners report.
The Chancellor announced in Wednesday's Budget that the Treasury has accepted the recommendations of the Myners report and will carry out a separate independent review on personal inv-estment products.
The review is set to look at commission levels, with-profits, unit and investment trusts and the investment skill base of advisers. Myners says IFA recommendations are slanted by higher offers of commission from life offices. It says lesser-known life offices can increase sales by improving commission terms.
The report says this “casts doubt over whether competition for policyholders by life offices is on the basis of investment performance”.
Aifa has reacted angrily to the implication that there is a link between commission paid to IFAs and the products they select. It points to the London Economics report which found no evidence of commission levels buying business.
Life offices also look set to be scrutinised for their use of free-asset ratios, which the report says can be manipulated. The obscurity of with-profits business, in particular, the relationship between bonus payments and fund performance, is also challenged.
This fresh investigation comes as a surprise to most of the industry as with-profits business is already coming under close scrutiny from the FSA and the recent Faculty & Institute of Actuaries report.
The Treasury is not releasing details on who is to chair the investigation or what timescale and exact remit it will have.
FSA spokesman Rob McIvor says: “We see this review as complementing the work we are doing rather than supplanting it. It appears to be going in to territory we are not covering, such as unit trusts and the commercial relationship between advisers and providers.”
Aifa chairman Lord Hunt says: “Surprisingly, the Myners report strays in to the area of personal finance when its primary concern is institutional investment. A new inquiry looks like a review too far.”
Syndaxi Financial Planning principal Robert Reid says: “I think the danger in having two reviews running simultaneously is that we could find ourselves implementing changes from one report when proposed changes from the other report push us in another direction.”