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Taken off the menu

The FSA has finally come out and admitted defeat, sounding the death knell for that onerous and, according to some advisers who have been in contact with Money Marketing, “pointless” document.

Coupled with the initial disclosure document, and introduced in June 2005, it was supposed to demonstrate an intermediary’s terms of business in a depolarised world.

The objective was to present customers with a clear and concise comparison chart showing the true cost of an adviser’s service set against the market average.

Nice idea? Perhaps in theory. Until it was discovered that the market averages were wrong due to the fact they took into account all the execution-only broking houses out there, bringing the “average” down below that of many IFAs, which in turn made them look more expensive than they were.

It has also been a familiar gripe over the last two years that the disclosure process was too laborious and did not in fact help the consumer as they normally ignored much of it.

Cut to this week, when the FSA announced its plans to scrap the menu and the IDD following concern from the European Commission that both documents would be seen as gold-plating Mifid and therefore unacceptable by the European Commission.

The FSA applied for Article 4 exceptions for the menu and IDD in January confident of convincing the Commission that due to the unique nature of the UK retail financial services landscape these measures were needed for consumer protection.

How wrong it was.

But then the FSA also published a report to coincide with the announcement admitting that it has seen no evidence of the menu’s success in achieving its objectives of reducing commission levels or increasing the share of advice paid for by fees.

The report conveniently allows the FSA to show it making an evidence-based judgement rather than being bullied by the Commissioner McCreevy.

The knee-jerk reaction from many of you has been that of relief tempered by concern over what might be introduced in its place.

Advisers have also expressed their frustration over the amount of time, energy and money wasted producing the documents.

Both Falcon Group chief executive Allan Rosengren and Highclere Financial Services partner Alan Lakey have questioned what might be brought in to replace it, but expressed relief at no longer having to take clients through the cumbersome documents.

Jamieson Financial Management principal Bruce Jamieson sums up the feelings of many in saying: “I do not think it makes a lot of difference because no-one ever reads them anyway.”

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