FSA Reviews IFA Selling

by Gill Montia

Story link: FSA Reviews IFA Selling

The Financial Services Authority (FSA) has plans to review the investment advice sector and take a look at its level of remuneration. The Authority is keen to improve the advice offered to consumers, particularly with regard to life and pensions products, and is considering rating advisers according to their qualifications and the level of advice they offer. It is hoped that the review will reduce the rate at which some policies are bought and soon after cancelled, or cashed in.

The FSA began a review of the Independent Financial Advice sector in 2006 and has since criticised the current system of commissions, which focuses on remunerating advisers according to the level of their sales. It is now recommending that the market be split so that professional financial planning and advisory services could be provided to consumers needing the full range of advice by highly qualified advisers. At the same time, a primary advice sector could be created for those with simpler needs.

Furthermore, the FSA is looking at creating two types of adviser at the professional financial planning end of the market, so that those advisers who are most highly qualified can agree their remuneration with the consumer. Currently, Independent Financial Advisers are responsible for the bulk of life insurance and investment sales in the UK but many are effectively tied to providers because they are being paid commission. Qualifications across the sector vary widely as there is no industry-wide exam or standard.

The FSAs proposals are undergoing a period of consultation and feedback will be published in 2008.