AIFA is concerned that the proposals will create an unlevel playing field between FSMA IFAs and non-FSMA-authorised advisers

The Association of Independent Financial Advisers (AIFA) has warned the Financial Services Authority (FSA) that the current Retail Distribution Review (RDR) proposals for the corporate pensions market risk restricting access to advice. AIFA believes that there is insufficient evidence to justify implementing proposals for the retail financial advice sector into the corporate pensions market.

The warning comes as part of AIFA’s response to the FSA’s consultation on the corporate pensions market, part of the wider consultation on delivering the RDR. AIFA is also concerned that the proposals will create an unlevel playing field between Financial Services and Markets Act (FSMA) authorised advisers (IFAs) and non-FSMA-authorised ‘advisers’.

Andrew Strange, director of Policy at AIFA, said: “The corporate pensions market is a complex and unique area of financial planning. I am concerned that we have been given far too little time for an industry wide consideration of the issues within this market, and that RDR concepts designed for the retail market are being forced upon the corporate sector. The proposals could destabilise a well organised, consumer driven market. With the shift from DB to DC pension schemes employees are in ever greater need of advice on pension planning. FSA must ensure its proposals do not make it even harder to access professional financial advice. A significant unintended consequence of these proposals could be firms promoting direct-offer pensions without advice to consumers. This would be a backwards step and would reduce consumer access to advice.”

“The nation’s retirement planning, in particular pension planning within the workplace, is a significant and increasing social policy issue, and clearly joined up thinking needs to extend beyond FSA to HM Treasury and DWP, to the Pensions Regulator and PADA. Advice to employers, even when identifying a specific GPP provider, does not generally amount to a personal recommendation and is therefore outside the scope of FSMA. In applying the RDR to authorised advisers, FSA will unintentionally create an unlevel playing field in the areas of qualifications and professionalism, between those caught by the wider RDR proposals under FSMA and those who are not,” he added.

“Our research disputes the FSA’s claim that the ‘predominant market model is for GPPs to be promoted to individual employees without personal advice’. When questioned, 93% of IFAs offered advice to an employer, which is generally out of scope, but 71% also offered personal advice to employees. This suggests that the vast majority of IFA GPP business is conducted with individual regulated advice. FSA’s proposals will therefore create a significant imbalance between FSMA and non-FSMA sectors. This could drive advisers to switch sectors, which would reduce access to individual personal advice. This would run counter to FSA’s proposals and the wider interests of UK public policy,” Mr. Strange concluded.