The Financial Services Authority (FSA) is, ‘having second thoughts’ on the issue of commissions versus fees in the debate over proposals put forward in CP121, according to Paul Smee, director general of the Association of Independent Financial Advisers (AIFA).
Speaking at the Tenet Group annual IFA conference, Smee argued that research showed there was hardly any bias in the way financial services products were sold under commission, and that consumer tests have clearly found that deferred payments systems do not work.
AIFA is also concerned that CP121 does not offer a level playing field for independent mortgage brokers and tied agents.
Smee said there is no indication at this stage that tied agents working for banks and building societies will be required to inform consumers of the costs of the advice delivered, when mortgage brokers will be required to do so.
Smee said the FSA would be doing a great disservice to the industry if it did not ensure a level-playing field, suggesting back-room accountancy must not be allowed to enable banks and tied agents to hide costs incurred.
Smee also said that two-tier advice is a misnomer, but suggested the fact it is even mentioned in CP121 is ‘recognition that current conduct of business rules are too cumbersome.’
He added AIFA is pursuing talks with the FSA about this, because it is important to recognise the specialist skills set that will be required to get through the minefield of state benefits.