AIFA reveals its stance over CP121
Paul Smee, director general at AIFA, said: “We believe that the FSA’s proposals would bring new competitive distortions to the market. We are particularly concerned about what will happen in the market place if, as we predict, there is a substantial contraction in the independent sector following the introduction of the proposed defined payment system (DPS). The DPS needs to be modified and there should be equivalent rules in place for all the various types of distribution. In addition, the new regulations should not be introduced in a piece-meal fashion”.
The body has raised concerns over the status of advisers as it believes that there will be two distinct categories in the future: those who are contractually linked to a limited number of providers; and those who will want to remain fully indepedent. AIFA is worried that the FSA appears to suggest that both will be described as Authorised Financial Adviser (AFA), as it feels that this will cause confusion among consumers.
It is also worried that CP121 is not clear on how either group will be regulated; whether there will be any limits or restrictions on multi-ties, or any difference in the COB rules applying to the two categories within the group.
The current COB rules state that advisers must give ‘best advice’, which refers to both the product recommended and selection of provider. However if all firms are linked to this then AIFA does not believe that the same best advice rule can be applied to firms who contractually tied to a limited number of providers and to those who are not.