RDR protection paper: Opinions positive for the FSA

Reaction to the FSA’s consultation paper CP10/8 on pure protection sales by retail investment firms has been positive.

The two areas singled out for praise are the proposal to amend rules so firms that sell protection under COBS, rather than ICOBS can continue to do so after the Retail Distribution Review is implemented, without having to apply the rules on adviser charging to their protection sales, and a plan to allow protection product commission under both COBS and ICOBS, with disclosure, when sold alongside investment products.

Commenting on this, Clive Waller, managing director of CWC Research, said: "On the protection piece, FSA have been eminently sensible." He noted that previous COBS/ICOBS proposals were "all about internal process" and not about customer. "They have dropped it. Well done FSA," he says.

Nick Kirwan, assistant director of protection at the Association of British Insurers, comments: "We are very pleased with today's proposals for clarification on disclosure ‘alongside' investment advice. We have been talking with the FSA long and hard about this and today's paper shows they are listening. Advisers risk complaints if the situation on what ‘alongside' means remains subjective.

"Disclosing commission is important. When an adviser asks for a fee of £500 on investment advice, customers should know if last week they earned the adviser £1000 commission because then they have the option to negotiate better deals."

Advisers agree, Alan Lakey, principal of Highclere Financial Services, says: "I have no problem with disclosing commission, nobody should be embarrassed in disclosing commission anyway. That just makes sense."

While Roy McLoughlin of IFA Master Adviser, adds: "The protection community will see this as a very sensible outcome and it will allay the fears of many that a ban on commission would have crucified protection sales."