24 Nov TISA Report Fails to Allay FSA Fears over DIFs
The Tax Incentivised Savings Association (Tisa) have failed in their effort to calm the fears expressed by the FSA over the use of distributor-influenced funds (DIFs) by IFAs, despite a report being commissioned that apparently demonstrates the funds can be employed in a way that doesnt' restrict the independence of the IFA.
Tisa had hoped to convince the FSA in regards to DIFs, but it seems that the regulator is continuing to remain sceptical, which may mean that IFAs who use the funds could qualify for adviser charging exemptions.
The report was written by the law firm Eversheds and claims that advisers would be able to retain their independence and use DIFs.
Tisa had delayed the publishing of the report as it lobbied the FSA but has now decided to make the findings public after failing to convince them.
The report said "A firm which holds itself out to be independent can still sell its own distributor fund post-retail distribution review (RDR) but subject to further checks and balances."
The report did acknowledge potential difficulties but continued "We see it as acceptable for a restricted adviser to use a distributor fund as default. This may not be so clear cut where an adviser is independent but, should the fund
be managed on an open architecture basis and be as suitable as any other solution available, then we consider that it would be an appropriate investment for an independent adviser to offer.
"The FSA makes clear it does not expect advisers to provide an artificial spread of investments to meet the independence rule but instead to be mindful of the range of product and investment options across the whole market to ensure suitable advice is given. This is perhaps then a useful analogy which would indicate that IFAs can use distributor funds as a default where it has considered the suitability of the distributor funds in light of other products available."