Daily Insurance Industry News
 
 
Daily Insurance Industry News
Thursday 22nd of February 2018
September 6, 2007

Delay in access to IFA status

by Gill Montia

Story link: Delay in access to IFA status

IFA Promotions (IFAP), which promotes independent financial advice, is dissatisfied with the delay in allowing consumers full access to information on the independence or otherwise of financial advisers.

The Financial Services Authority (FSA) expects this information to be in the public domain by early 2009 but IFAP believes that it should be made available to consumers much earlier.

As things stand, a financial adviser can describe themselves as “independent” if he or she offers clients the option of paying on a fee-only basis.

Many investors are reluctant to pay fees and opt for their adviser to work on a commission basis, whereby a payment is received from the provider.

This situation has led to a long running controversy within the financial services sector, as it has been argued that advisers working on a commission basis are likely to recommend products that provide a good payout, thus compromising their independence.

Currently, there is no official means to distinguish between advisers who only accept fees, those working on a commission basis and those working for both fees and commission.

IFAP has been lobbing the FSA to take action, and a nationwide consultation is underway to establish whether Independent Financial Advisers (IFAs) are willing to open up their accounts in order to verify whether they are working on a fee or commission basis.

The consultation will be complete by the beginning of October 2007 but there are concerns about how useful such information will be.

For example, if an IFA charges a set fee but uses commission to cover half the work, this would not be readily detectable by looking at the IFA’s accounts.

 

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