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09 Jan, 2008

Nicole Blackmore - 08-Jan-2008

AIFA has raised concerns over the FSA's Review of Prudential Rules for Personal Investment Firms, saying the focus is on advisory firms at the expense of the wider market.
In its response to the review AIFA criticises the FSA for not fully addressing the real debate about the purpose and role of capital and its general lack of understanding of the IFA sector.

AIFA also calls for its 'Stakes in the Ground' initiative to be developed into an industry wide project, operating under a supervisory board including consumer representatives. AIFA believes this would lead to fewer complaints, a willingness to accept a statute of limitations and help with financial capability issues.

AIFA deputy director general Fay Goddard says the repeated inference that firms make conscious decisions on their propensity to mis-sell and that the capital they hold reflects this is extreme and does not address the real debate about the purpose and role of capital.

She says: "We feel that the paper contains misconceptions and contradictions relating to the amount of capital held by IFAs and the reasons for doing so. We firmly refute the claim that low capital directly affects a firm's behaviour and leads to a higher risk of mis-selling.

"We accept that this happens in isolated cases but we have found no evidence that this is systematic throughout the profession. The vast majority of IFAs are small businesses whose clients' interests are closely aligned to their own. They are generally risk averse and go to great lengths in trying to meet acceptable standards."

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