TISA – the Tax Incentivised Savings Association - has published a report into distributor funds setting out best practices necessary to achieve good consumer outcomes within the current and post RDR regulatory structure.

 

It follows concerns expressed by the Financial Services Authority and by the investment industry in relation to the potential for conflicts of interest and bias in the operation of distributor funds. TISA recognised the need to review the market and established an executive committee of market participants who in turn commissioned Eversheds to produce an independent report.

 

The report concludes that it should be possible to address these concerns within the existing regulatory framework. However, in some cases distribution firms will need to modify their processes and arrangements or introduce new systems and controls.

Areas highlighted by the report where best practice is essential are: a need for straightforward product design; clear branding; transparent pricing, fee justification and performance disclosure to address the need to deliver value for money; reporting and switching to competitor funds.

Tony Vine-Lott, TISA director general, said: "The overriding aim of this review is to ensure that distributor funds provide positive consumer outcomes. To achieve this we need a distributor funds market that operates compliantly and effectively for the benefit of all parties - one that allows product providers to devise effective and appropriate solutions to meet a variety of clients' needs.

"By identifying industry best practice this report is a significant step forward in the process. A number of discussions have been held with the FSA who have been given the final report. We wish to continue to work with the regulator on areas that we consider need further debate and clarification, namely: the various ways in which IFA and distributor networks can operate under the vertically integrated business model compliantly; the ways in which IFA and distribution networks can evidence and support the position that they provide a substantive manufacturing role; and the checks and balances required to evidence satisfactory consumer outcomes."

The report is available to view on the TISA website: www.tisa.uk.com