The FSA’s distribution review must recommend that only fee-based advisers are allowed to use the independent label, says ex-FSA retail investment chief David Severn who is also a former chief executive of Aifa.
He believes this model is in the FSA’s sights and the time has come to create a distinction between advisers to ensure greater clarity for consumers.
Severn says one of the reasons why depolarisation has not lived up to the FSA’s expectations is because the defined-payment system, which would have required IFAs to abandon commission, was “sabotaged” by bodies such as the Financial Services Consumer Panel and Aifa.
He believes the independent label encompasses too wide a range of firms and those relying on commission, no matter how much is rebated, should have to use a different tag, such as independent sales adviser. He says consumer unwillingness to pay a fee is linked to the public’s perception of IFAs and this measure would improve this and increase professionalism.
The FSA has highlighted commission as one of the five priorities for its review of distribution. It will publish a discussion paper by the middle of next year and has declared recently that the industry “is on the cusp of change”.
Severn says: “The time has come to implement this measure so IFAs are seen as giving a more professional service. There is nothing wrong with selling products to people but they should not be able to use the independent label. You should only be allowed to call yourself independent if you are fee-based so the consumer is clear about the service.”
Aifa director of public affairs Tracey Mullins says: “We completely reject this suggestion as it is not for the FSA to dictate to the industry how it runs its business. Remuneration is a key area our working group will be examining but transparency is what is important, not forcing the market down a particular route.”