Press Release

RETAIL DISTRIBUTION REVIEW: IMA URGES FSA NOT TO MISS THE OPPORTUNITY TO TACKLE COMMISSION BIAS

27 June 2007
 
The Investment Management Association has urged the FSA not to miss the opportunity to tackle commission-bias in the retail market in its Retail Distribution Review. 

Speaking at the FSA’s Retail Distribution Review conference Richard Saunders, Chief Executive of the Investment Management Association, will say:

“We should not shy away from accepting that commission-driven mis-selling is a reality in the retail market.  Research commissioned by the FSA and by others strongly suggests this.  I, for one, do not see how it can be consistent with treating customers fairly for clients to be put into high commission paying products without first ensuring the first £7,000 of savings is placed in a tax-free ISA.  I would urge the FSA to consider how to tackle this directly.”

Commenting on the proposals in the FSA discussion paper on the Retail Distribution Review, Mr Saunders said:

“The ideas for the creation of a new tier of professional financial planners are welcome, as they go with the grain of developments in the market and will help promote transparency.  The growth of platforms – covered in a related Discussion Paper from the FSA today – will also play a significant part in fostering greater transparency in the market.

But the concept of offering a range of simple products backed by simple advice 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 therefore products, may be favoured in a mistaken belief that the product being sold is ‘simple’.  Experience in continental Europe has been that bank distributors have favoured opaque but profitable structured products over transparent, regulated products like funds.  It would be a great pity and bad for consumers were the FSA to allow such a situation to develop here.”