RegulationJan 12 2012

Distributor-influenced fund advice will be heavily restricted: FSA

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The regulator said IFA firms will no longer be able to take a share of the annual management charge for their role on a distributor-influenced fund governance committee.

Adviser charges for recommending such a fund must not “vary inappropriately compared to substitutable or competing retail investment products”.

The FSA made the statements as part of its proposals to the distributor-influenced funds factsheet.

It stated that where IFAs recommend a distributor-influenced fund, it expects to see evidence that the recommendation is in the customer’s best interest.

The FSA said: “We expect the RDR to have a significant effect on the use of distributor-influenced funds. Given the inherent conflicts of interest, we would question whether an independent firm could meet its obligations to act in the best interests of its client and provide advice in an unbiased manner if it recommends a distributor-influenced fund.”