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Severn says FSA wants to drop plans for AFA

The FSA would like to drop the Authorised Financial Adviser model and implement a payment system more palatable to the majority of IFAs, according to head of polarisation review David Severn.

Speaking at the Distribution Strategies Post-Sandler conference in London last week, Severn said that if there was an alternative to the defined-payment system which would not result in a mass desertion from the IFA sector, then there would be no need for the AFA to exist.

It is now more of a question which of the two main alternatives – the Sandler model or the Aifa&#39s menu option – can be delivered in a cost-efficient manner, said Severn.

He said: “The AFA is something that we would much prefer to do without. It was only included in CP121 to identify those firms still offering whole of market advice but not operating under the DPS. It complicates the advisory landscape and the preference would be to do without it.

“If we can create a payment system which the majority of IFAs, if not all, can deal with, there will be no need for AFA. We only needed it because there were fears the DPS would lead to a desertion from the IFA sector.”

Pensions & Investment Management principal Phil Moore says: “I welcome this, it is obviously good news. The only downside I can see is did we have to go through all of this rigmarole just to get back to a situation not that different from where we started?”

Aifa director general Paul Smee says: “If they want to be able to do without the category of AFA they will have to make sure the payment system for IFAs is flexible enough and appropriate for the many different types of IFA there are.”Speaking before Severn at the conference, Ron Sandler rejected arguments from life office bond providers that removing the 5 per cent withdrawal allowance would seriously damage the industry.

He said if the only reason providers are selling the products is because of a “curious quirk” in the tax laws, then they should not be sold at all.

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