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Scandinavian shock as banks drive out IFAs

UK IFAs should beware of the fate of their Scandinavian counterparts who have been wiped out after pressure from banks outlawed commission, warns Aifa chief Chris Cummings.

The decision by the FSA’s Swedish and Norwegian counterparts follows heavy lobbying from the region’s powerful banking sector to force independent advisers to charge fees only and strip them of the commission option. Cummings says the move was precipitated by the EU’s insurance mediation directive.

The Norwegian IFA trade body has made an unsuccessful appeal to its equivalent of the Office of Fair Trading and is now taking its case to the European Commission. Norway is not an EU member but has opted in to much EU legislation. The events have sent shockwaves across the European adviser community, with European IFA trade body Bipar calling a meeting with Aifa to discuss the dangers presented by the “Scandinavian experience”.

The news from Sweden and Norway will make uncomfortable reading for many British IFAs, with the ABI putting forward the idea of scrapping some forms of commission.

IFAs make up a smaller proportion of distribution in Norway and Sweden than in the UK and the balance of power is weighted more heavily in favour of banks and providers.

Cummings says: “This is a major shock to the advisers in these countries. Advisers in the UK are in a stronger position but it is always worrying when regulators bow to pressure from banks. We need to be aware of anything that happens across Europe that is harmful for IFAs.”

European Federation of Financial Advisers and Financial Intermediaries secretary general Vincent Derudder says: “This trend is occurr- ing across Europe, not just in Scandinavia. Providers are trying to capture distribution and squeeze IFAs out of the market. They are using EU legislation as cover to do this and tricking advisers into thinking that they cannot cope on their own.”

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