Industry groups respond to FSA proposals

Industry groups have responded with both criticism and support for FSA proposals released today in t...

Industry groups have responded with both criticism and support for FSA proposals released today in the regulator’s discussion paper on the Retail Distribution Review.

Richard Saunders, chief executive at the IMA, said the ideas for the creation of a new tier of professional financial planners are welcome, while the growth of platforms will also foster greater market transparency.

However, the IMA did not support the concept of offering a range of simple products backed by simple advice.

“This has been tried before without success. It risks creating an un-level playing field which will work against more transparent products such as funds. Even a simple product can be mis-sold and we are concerned that certain types of distributors, and products, may be favoured in a mistaken belief that the product being sold is simple.”

Saunders said experience in continental Europe has been that bank distributors have favoured opaque but profitable structured products over transparent, regulated products like funds.

Meanwhile, the FSA’s discussion paper on platforms won support from David Dalton-Brown, head of Fidelity FundsNetwork.

Dalton-Brown said Fidelity supported the FSA’s statement that advisers should carry out full due diligence when selecting a platform, taking into account the provider's solvency, capacity and technical expertise.

“Platforms are now a vital part of the retail financial services industry and should be given as much consideration as the strength of a life office or investment manager," he added.

“The discussion paper, if implemented, will also do much to eradicate any conflicts of interest in the market. In effect, the FSA has issued a direct challenge to the practice of advisers owning shares in the platform which they use. New entrants to the market need to respond to this directly.”

“It is also encouraging to see the FSA shatter the myth of the 20% rule that has been wrongly viewed as a bar to advisers using a single platform for all of their investment business. Lastly, the paper brings much needed common sense to the current debate about platform-to platform re-registration. As the paper says, the client's interests need to be at the heart of any discussion about this type of re-registration.”