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RU64-style regime faces IFAs on suite

The prospect of an RU64-style regulatory regime has been raised over the new stakeholder suite of products following Ron Sandler&#39s stated preference that IFAs and existing salesforces are the best distribution channel for them.

IFAs giving any advice on investments, pensions or with-profits could be forced to defend their decision not to recommend one of the products.

Industry sources call it a “frightening prospect” and say IFAs could be forced to sell products on which they cannot make any money.

Critics claim RU64 could only work in the stakeholder context if all advice was fee-based, only given through the workplace or if the price cap was raised.

The RU64 regime for stakeholder pensions has been widely blamed for the decline of non-stakeholder personal pensions. IFAs say the low-risk profile of the new products would mean they clearly will not be suitable for everyone.

LIA head of public affairs John Ellis says: “If an RU64 regime was imposed, it would be a tremendous burden on the costs of advice. They would be selling products but not making enough to make ends meet.”

Aifa director general Paul Smee says: “We have got to make sure it does not happen. The problem of RU64 is it would make it very difficult to price advice.”

Timothy James & Partners partner Rob Guy says: “It is going to be very difficult if you are acting on an independent basis not to use a benchmark product as a comparison if one exists.”

FSA spokesman Rob McIvor says: “It is too early to answer. We cannot speculate.”

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