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Providers fight factoring ban

Providers will continue to lobby the FSA over its ban on factoring, arguing that the regulator has failed to make a case for removal.

The FSA’s retail distribution review says provider firms will not be able to advance finance to advisers out of their own funds.

Aviva director of distribution development Stephen Gay says it is the regulator’s responsibility to make the case for a ban. He says: “The industry believes that it is up to them to prove why factoring should be allowed to continue but I think it is the other way round. The FSA should prove why there is reason to remove it and I do not think it has done that yet. You cannot sleepwalk into something that has not been proven. The FSA has to do more to prove its case, espec- ially in the current climate.”

Aegon head of corporate affairs Francis McGee says he intends to continue campaigning for factoring to be allowed.

He says: “How do you enable somebody to start regular saving at £100 a month if they have to pay an initial advice charge of £500? The industry is moving away from nil-allocation periods, so how do you enable consumers to pay for that?

“Factoring has always been the thing that enables this. The case has not been made for stopping factoring in its tracks. Regular saving is a billion pound market every year. I do not regard the argument as being won or lost, there is more ground to cover.”

An FSA spokesman says: “Adviser charging is about removing bias. If providers were allowed to advance their own funds to adv- isers, it would allow bias back into the system.”

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  1. Factoring
    If we are to debate this issue, we should be able to see the perceived issues from the Regulators’ vewpoint. It is of course very unfair of me to take quotes out of context but not knowing the context makes it impossible not to coment that I am struggling to interpret the meaning in the following quote from the FSA “An FSA spokesman says: “Adviser charging is about removing bias. If providers were allowed to advance their own funds to adv- isers, it would allow bias back into the system.” The maximum commssion agreement (LAUTRO rates) removed bias did it not? I can see that using Platforms for investment and pension provision makes it possible to unbundle costs for a client but for term and other insurances I think trying to unbundle costs and remove the system of indemnity or level commssion seems to have had no justification from the FSA. It is a system which seems to work very well. The regulator already requires IFA’s to find te best rate for their client and to justify the product’s selelction in the file. IFA’s enjoy getting the best deal anyway. Surely the Regulator can coninue to monitor files in teh way it presently does and ensure that a commission bias is not operating on insurances? If the FSA CAN’T do that then a maximum commssion agreement is a pretty easy thing to re-introduce.

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