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‘Support service firms will start to fade away’

Clash as Ken Davy says Stanley Lovell is ‘scare-mongering’ over future of support companies

Support service companies are a temporary phenomenon and will be regulated by the FSA within the next two years, says InPartnership group executive chairman Stanley Lovell.

He believes that support service firms will diminish in significance when Mifid and the capital requirements directive come into force next year as swathes of IFAs will switch from being directly authorised to becoming appointed representatives of networks in order to deal with the extra compliance and administration burden.

But SimplyBiz chairman Ken Davy claims that Lovell is “scare-mongering” and he believes that Mifid will only affect a small number of directly authorised IFAs operating overseas.

Davy says: “I do not want to fall out with Stanley but he clearly does not understand how Mifid is going to operate. It will only affect a very small number of directly regulated IFAs who handle client money and who want to operate overseas. He is scare-mongering in the extreme.”

Lovell says the FSA is planning to regulate support service companies after the regulator voiced concerns to him in a meeting that non-regulated companies were advising IFAs.

He says the FSA is concerned that because some support service providers are purported to be negotiating commission rates with life companies and selecting panels for advisers, this could be interpreted as giving advice.

But Davy says SimplyBiz members can use what product providers they want and the firm does not instruct members on which providers to use.

Lovell says: “In a meeting with them, the FSA said they do not think we have cause to worry about non-regulated firms because they are looking at it. Reading between the lines, I am quite sure that all support service companies will have to be regulated and I would guess in the next year or so.”

FSA spokesman Robin Gordon Walker says: “Any extension of regulation is a matter for the Government to decide and not the FSA.”

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