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OFT tells regulator to get menu sums right

The FSA has been forced to change the way it calculates the payment menu average commission rates after the Office of Fair Trading found that they are skewed against advisers.

The move comes a year and a half after Aifa first dem- anded action over calculation discrepancies and was forced to report the FSA to the OFT after the regulator ignored its concerns.

An FSA report, triggered by the OFT, found evidence that product providers included non-advised sales in their information returns, which meant that menu market-average figures for collective investment schemes were too low.

As a result, the FSA will revise the wording of its questionnaire and introduce new checks to improve quality assurance of data ahead of the annual reassessment of the menu averages in November.

Aifa director general Chris Cummings says the move is a clear victory for independent advice and proves the trade body’s argument that the regulator got its sums wrong.

He hopes that the OFT action will further validate Aifa’s argument that the menu needs to be greatly simplified to benefit advisers and counter the looming Mifid threat to the payment menu from banks.

Fishburns solicitor Harriet Quiney says the FSA’s miscalculation has damaged consumer confidence in the advice sector at a time when public confidence is sin short supply.

Cummings says: “The message from the Office of Fair Trading is loud and clear – the FSA miscalculated the menu market averages and made advisers look more expensive than they are. It is just a shame that it has taken so long for the FSA to get the message.”

Consilium managing director Kevin Morgan says: “If it was the other way round with genuine concerns that the menu was making financial advice look cheaper than it really is in the eyes of the consumer, then the FSA would have cracked down straight away so it is disappointing that it has taken the OFT to change the regulator’s way.”

FSA spokeswoman Sam Bennett says the episode has not changed the way the regulator operates and points out the recalculations were still much lower than the estimates given by Aifa.

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