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Providers&#39 collective to bridge IFA funding gap

A collective investment company funded by providers could bridge the IFA funding gap without compromising adviser independence, according to Aifa.

Both Aifa and Sofa have held discussions with providers looking at how to provide capital to the IFA sector while avoiding being seen to influence advisers.

Removal of the better than best rule would allow single providers to buy IFAs outright but Aifa is concerned that this could lead to consumers perceiving bias.

Life offices are reportedly looking at a model whereby a company would be created with IFAs and providers as shareholders to act as an investment house for IFA businesses but at arm&#39s length from providers.

The collective investment vehicle could be set up to provide funding, either through equity stakes or soft loans, to IFA firms with business plans that met fixed criteria set up along the lines of those used by venture capital firms.

Providers see the plan as a way to fund the change from up-front commission to level commission.

Aifa director general Paul Smee says: “Providers collectively investing in IFAs might be a way of squaring the circle to get round consumers&#39 concerns of selling the products where a firm is owned by one provider.”

Sofa chairman John Porteous says: “The funding gap is one of the biggest problems facing IFAs so we need to look at all the options. But a collective pooled investment vehicle would only be a starter if you got enough providers on board.”


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