Monday 2nd July 2007
Financial advisers who receive commission for certain products should not call their investment advice "independent", according to the Financial Services Authority (FSA).
The first paper published by the FSA as part of its Retail Distribution Review calls for independent investment advice to be commission-free in order to protect consumers.
Proposals from the FSA include the possibility of establishing a two-tier system for financial advisers, with the most experienced and knowledgeable receiving the right to call themselves independent.
These would charge a fee to the customer, rather than receiving commission from the provider of the investment or savings product, the authority explains.
Meanwhile, those whose investment advice centres on commission-based products would be obliged to remove the term "independent" from their description, the guidance states.
Clive Briault, managing director of retail markets at the FSA, predicts that any changes could take some time to implement.
"Tackling the root causes of the problems within the retail investment market is a challenging and complex issue and is not something that can be solved overnight," he warns.
"The proposals from industry, consumer groups, trade and professional bodies set out in our paper today have considerable merit and are worthy of further exploration and debate."
Commenting on the proposals, the Investment Management Association recognises that a two-tiered system could fit within the existing structure of the market.
"The ideas for the creation of a new tier of professional financial planners are welcome, as they go with the grain of developments in the market and will help promote transparency," chief executive Richard Saunders notes.
But he adds that the concept of "simple" products and correspondingly straightforward advice could be misleading and could potentially result in an increase in the level of mis-selling by those financial advisers deemed not to be independent.
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