Advisers unfazed by FSA's focus on CIPs
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A survey of advisers by The Platforum has found that most will not change their position on centralised investment propositions (CIPs) despite greater scrutiny by the FSA.
The regulator raised concerns over CIPs - such as model portfolios, discretionary fund management and distributor-influenced funds - in a recent paper that warned against “shoe-horning” clients into unsuitable propositions.
The Platforum found that 61.5% of adviser respondents considered the paper would not affect their recommendation of the propositions to clients.
A further 7.7% of advisers thought they were more likely to recommend CIPs, while 3.8% would be less inclined to recommend them.
The survey revealed 26.9% of advisers were unsure how the regulator’s paper would affect the recommendation of the propositions. (article continues below)
Bill Vasilieff, the chief executive of wealth management platform Novia, says there has been no noticeable impact on the use of CIPs by advisers from the FSA’s paper. He adds: “CIPs of one form or another [account for] over 60% of business on the platform and that’s growing.”
Vasilieff says model portfolio use has increased with strong growth from the discretionary fund managers.
Further research by The Platforum revealed that use of discretionary fund managers, distributor-influenced funds and model portfolios had fallen during the second quarter of the year, with greater use of multi-manager funds reported instead.
However, the Novia chief executive says he has not seen any rise in multi-manager funds, labelling their use as an “easy option” for advisers.
The FSA published its guidance in April, which also took aim at replacement business - where clients are switched out of an existing investment into a new product or proposition.
Before publication of the paper, the regulator assessed 181 investment files from 17 firms recommending CIPs and found the quality of disclosure to be unacceptable in 108 cases. It also found the quality of advice to be unclear in 103 cases and unsuitable in 33 cases.
Linda Woodall, the head of investment intermediaries at the FSA, has previously warned that the regulator will not tolerate poor practice by advisers where CIPs are recommended.
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