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Sceptical regulator sets out evidence requirements for Dif business

Advisers will be able to recommend distributor-influenced funds and retain their independent label, the FSA has confirmed.

In its finalised guidance on Difs, the regulator reiterates its view that it will be difficult for firms to recommend a Dif and remain independent but it stops short of saying it will not be possible.

It says advisers must show evidence the Dif advice is suitable, has been made after a comprehensive and fair analysis of the relevant market, is in the customer’s best interests and in accordance with conflict of interest requirements.

They must document why the Dif is suitable, disclose all sources of remuneration and inducements, communicate overall effect of charges, disclose conflicts of interest, explain ongoing reviews and features and list the advantages and disadvantages.

The FSA says it is unlikely that non-advised sales of distributor-influenced funds will be suitable, given their complexity and potentially high costs.

It adds that firms advising on Difs will not be able to receive a share of the product charges as remuneration.

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