AIFA on Sir Howard Davies on CP121

In an announcement by AIFA, he said: “Sir Howard Davies chose the occasion of the AIFA annual dinner to announce the broad outline of the FSA's decisions on CP121. There will be a Consultation Paper in January which sets out the detail. Until then, we just have the broad outline of policy.

“He confirmed that the definition of whether someone could be called an independent adviser or not would turn on whether the adviser gave advice across the market and whether the option of paying by fee was offered to clients. This will tie in with the AIFA/IFAP menu project (which Sir Howard described as a text book case of how a trade body could work with the regulator). Sir Howard again emphasised that the FSA wish to see the costs of advice made known to consumers in all distribution channels. So he supported the principle of equivalent disclosure which formed part of our menu package.

“Polarisation as currently defined will end and firms who are restricted to selling one company's products will be able to offer their customers more choice. This was always the main objective behind the concerns over polarisation in the first place. We are sorry that the FSA has decided to remove this consumer protection but we are at least reassured that the way forward for independent advice seems much more certain than when CP121 was published.

“FSA have acknowledged that consumers have to understand clearly the exact nature of the advice which they are receiving. This will be communicated in a new initial disclosure document. Clearly the quality and clarity of this will be a key component in how well the new environment works for consumers. Again, we expect more details in January.

“The "better than best" rule will be abolished so that IFAs can attract investment from providers but there will be safeguards in place to preserve the independence of the advice.

“Compared with the starting position in CP121, this is a much better outcome than we could have expected.”