OpenWork to help with DIFs review

An independent review from OpenWork is to be launched into distributor-influenced funds by the Tax Incentivised Savings Association.

The Tax Incentivised Savings Association (Tisa) is launching an independent review into distributor-influenced funds (DIFs).

The project is being run by an executive committee of representatives from all sectors with an interest in distributor funds, including those from IFA firms and networks such as Openwork, Towry and SimplyBiz. The aim will be to deliver an industry-wide solution to ongoing concerns around their suitability and charges.   The FSA’s Retail Conduct Risk Outlook 2011 report highlighted a conflict between advisors’ incentives to recommend the products and work in their clients’ best interests and noted their charges are often too complex.

DIFs are currently being offered to customers by at least 40 firms, with £2bn of assets under management and 10,000 customers with assets invested.  This number is set to increase over the coming months, as Tisa director of policy Malcolm Small explains:

“Many advisers are looking to change their business model in response to the retail distribution review and this is likely to lead to an increased use of distributor funds. Therefore, it is vital that we identify the standards that all participants need to meet, in order for these funds to achieve their potential to produce good consumer outcomes.”

The committee will commission and fund a review by an expert external agency that can demonstrate experience in regulatory affairs.   A report on how the products are being used in practice, the best way to regulate them and ways to protect customer satisfaction is due by the end of May.

Mr Small continued: “The FSA report is helpful as it puts distributor funds firmly on the regulatory agenda, which means that the industry must face up to the concerns and develop a solution.”

The FSA is currently monitoring the distributor funds market and has indicated it will intervene unless improvements are made.

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