Speaking at a meeting on polarisation organised by the All Party Parliamentary Group on Insurance and Financial Services, Paul Smee, director general of AIFA, gave voice to AIFA’s concerns over the way in which the FSA approached CP121.
Smee said: "The proposals focus too much on redefining what constitutes independent advice and, by taking the one-dimensional view that this is all to do with remuneration, they threaten to cut the number of independent financial advisers by up to 90 per cent. This will damage a source of competition in the market.
"Independence is clearly not just about cost. It is also about delivering advice free from contractual ties to providers and giving consumers access to the whole market.
"There are alternatives to a defined payment system which are proportionate, cheaper and do not result in the sort of unintended consequences - such as the strangulation of workplace advice - which would come about as a result of its introduction.
"AIFA has outlined how a new option could work. It would give consumers a choice of payment methods - fee or commission - and would address the FSA's concerns about product/provider bias by making comparative commission levels available. It would not disrupt the market either and would enable significantly more IFAs to remain independent."
John Greenway MP, Chairman of the All Party Group on Insurance and Financial Services, said: "The All Party Group is especially concerned at the prediction that the FSA's proposals could decimate the IFA sector and lead to less competition in financial services generally. Whilst we recognise that there is a case for allowing banks and other financial institutions the ability to offer a wider choice of product than at present, this must not be done at the expense of the independent sector which cannot be in the consumer interest.
"I shall be writing on behalf of the Group to Howard Davies urging that the proposals be modified and it was extremely helpful to have AIFA's views on how this can be done in a way which still allows the Government to achieve it's objectives."
