The menu was first proposed by AIFA as an alternative to the regulator’s more restrictive plans for IFAs under its proposals for the post polarisation retail regime.
Paul Smee, Director General of AIFA, commented: “The menu concept was created by AIFA as an alternative to the defined payments system (DPS) proposed by the FSA. The DPS would have effectively required those IFAs who wished to remain independent to charge a fee. Evidence suggested that neither consumers nor the industry were ready to be forced down this particular route and when AIFA produced the menu - a more workable and cost effective alternative - the regulator changed its mind.
He continued: “At the heart of AIFA’s proposal was the simple concept that the cost of advice had to be set within the context of its value.
“The FSA has produced a much more complex disclosure document than we originally envisaged. But it will still enable IFAs to demonstrate their value, alongside the cost of their services.
“The most important part of the menu for the IFA is the “what we do for our clients” part. IFAs should focus on adopting that part of the document for their firm. The value of what advisers offer will then be apparent to the consumer.”
Paul Smee concluded,
“It seems from the FSA’s research that consumers like the idea of the menu so it may prove a good marketing tool for IFAs.
“Tied agents, direct sales forces and new types of distributors of financial services products, will be required to adopt the menu approach and disclose their costs and charges upfront on an equivalent basis. So the consumer will be able to compare services and costs with other advice/distribution channels. We believe that this could show the advantages of using the IFA channel. “
Under the new regime, in order to retain their independent status, IFAs will now be required to give consumers a choice of payment methods. AIFA believes this will provide both firms and consumers with the flexibility they clearly favour.We are pleased that the FSA has extended this disclosure across all distribution channels. We had always anticipated that even if the FSA had stayed with the DPS, it would have been looking at ways of highlighting the cost of advice across the board.
AIFA will be submitting a full response to the FSA’s CP 04/03 on the menu and the draft rules for depolarisation.
