Head of corporate affairs Gareth Evans says if factoring is banned under the retail distribution review, it will kill regular-premium products.
He says: “If that happens, you will get a situation where only wealthy people will have enough money to access the market.
“We do not want a situation where providers are competing for business through their factoring terms, which would introduce a new type of bias. There would need to be consistency across the peace, which could then cause issues with the Office of Fair Trading.”
An FSA spokesman says there are no plans to retain factoring under the RDR, as the regulator sees it as a bias risk. But he adds: “If there are strong calls from the industry, they would be best considered during the consultation period later in the year.”
The Association of Independent Financial Advisers is fighting hard for a form of factoring to be retained under the adviser-charging remuneration model.
Director of policy Andrew Strange says: “Factoring is essential if regular premium products are to survive. The Office of Fair Trading and the European Commission may have views about its continued use that have to be considered but I wholeheartedly agree that it must be allowed. There are a number of possible solutions, including a common industry standard for providers. Commercial factoring firms also exist and they could sit between providers and advisers to offer the service.”
Bill Warren Compliance managing director Bill Warren says if the FSA does enforce a ban, it could be detrimental for advisers as well as consumers.
He says: “Anything that damages the regular-premium market in the current economic environment is a bit of a problem. As long as there is consistency across the industry as far as provider terms, then there is no issue of bias. If the Office of Fair Trading is educated by the FSA on the way that factoring works, then it should not be a problem as far as being viewed as anti-competitive.”