The FSA has published its RDR feedback statement. Will distinguishing between independent and sales advice, setting minimum qualifications for IFAs and introducing a standard for independent advice ‘reform the investment market' and increase confidence and trust for consumers?
Matt Morris, LifeSearch
The outcry from IFAs after the Retail Distribution Review (RDR) publication has been more or less unanimous in labelling the regulatory report damaging to the future of independent advice in the retail investment market.
It seems almost inevitable that the RDR will eventually include protection, although it is not currently included in the remit. In particular, it is important that there must not be a forced move away from commission to fee-charging in protection because there is no investment element here for commission to eat into.
Few people would pay a fee for protection advice and introducing such a system would damage the role of the IFA and be detrimental to the consumer. LifeSearch has been vocal in voicing these views and will continue to do so.
Also, it seems obvious that tied sales agents are not giving genuine advice, yet the RDR fails to clearly distinguish between advice and sales as we thought it would after the Interim Report was published in April. Sitting in between IFA and non-adviser is a bizarre tier of ‘sales advice’ which is not true advice at all. This is bad news for consumer understanding and runs counter to the spirit of the Insurance Conduct of Business.
If introduced in its present form, the RDR would limit consumer access to advice and, no doubt, increase the financial burden on adviser firms dramatically. It simply could not work in protection.
Peter Le Beau, Le Beau Visage
I wish I felt that the RDR looked at protection in detail. While it is mentioned in the recent feedback statement, this may be more of an aside rather than a serious attempt to analyse the specific issues facing protection.
The protection market struggles through a drying up of distribution. The demise of direct sales forces that used to be committed to satisfying client need separated a huge potential market from any sort of protection advice. Even if IFAs passionately believe in selling protection, can they afford to do so if they have to charge fees that reflect the many hours necessary to sell a contract? Of course not and here lies the tragedy. The industry talks glibly about advice and client need but is only really interested in those needing wealth management not insurance.
Many have lost sight of the most fundamental mission of the life industry – to cover life and health risks that can derail business or family life.
The statement fails to mention income (IP) protection. Can we tolerate a regulatory adjustment taking place that neglects the major raison d’etre of our industry? Raise IFA standards, separate advice and sales, and enforce minimum standards of competence as fiercely as it likes. If the FSA has effectively cut off access to protection products for millions of people how can it begin to think it has resolved distribution issues in the industry?
Alison Turner Holmes, Scottish Provident
Over the years, many changes were predicted to be the end of the industry – the demise of The Financial Intermediaries, Managers and Brokers Regulatory Association and The Life Assurance and Unit Trust Regulatory Organisation, the PIA (Professional Insurance Agents??), and the introduction of fact-finding – but we are made of stronger stuff. The industry in fact embraces change. So here is the RDR which aims to improve clarity for consumers, raise professional standards and improve transparency in cost of advice.
This seems perfectly reasonable and, in spite of some concern expressed around timing, I am not sure I agree that 2012 is too close. If London can be ready for the Olympics, I am sure we will be ready for the RDR.
Raising professional standards is key to the industry’s longevity. For too long, it was viewed as a bunch of ‘life assurance sales men’ but we should be up there with accountants and solicitors in terms of offering a valued service for which people are willing to pay.
If we could get rid of the word ‘commission’, would that be a start? Intermediaries are not paid for recommending a product to clients at point of sale, like other professionals, they are remunerated in conjunction with their knowledge and skills.
Industry qualifications are good news but they must be set at the correct level and relevant to clients and advisers.
Linton Penman, Unum
Unum welcomes the FSA’s attempt to reinvigorate consumer trust in UK financial services. The RDR does not immediately affect protection providers but the review will undoubtedly have major implications for the financial services landscape.
As an IP specialist, we are keen to understand what that new landscape will mean for the distribution of protection products and for the availability of advice.
Higher standards of investment qualifications for advisers will help improve the general consumer perception of the value of advice. The precedent of the financial planning certificates introduction suggests that most advisers will rise to the challenge but a minority may look to narrow their business focus to non-investment areas and some may exit the market altogether.
It will be challenging for advisers to achieve the proposed capital adequacy requirements by 2012 given the economic climate and intended demise of indemnity commission terms on pension and investment products.
In the short term, IFAs may respond by actively reviewing their business models. This is likely to increase the take up of network membership and drive consolidation in adviser firms. However, longer term, the market will benefit from a more professional standing, enhancing the attraction that it has for new advisers to enter the industry.
