RDR: Line drawn between investment and protection – TISA

Malcolm Small says the FSA’s decision not to read across adviser charging to the protection market is a pragmatic recognition of different sectors of the industry.

"The FSA is clearly drawing a line between the investment and risk businesses. The risk market has historically operated on commission," says TISA's director of portfolio & retirement planning. "The decision shows the focus of the RDR is on the investment side."

Small thinks the FSA's ruling - announced in its latest consultation paper released today - could lead to businesses setting up adviser firms purely based around protection.

"If that will be the case, it will help close the gap in the protection market and this can only be a good thing."

Small also says the decision not to read across the ban on traditional commission structures could have an interesting impact on wraps looking to enter the protection fold.

"At the moment, wraps don't offer life insurance but if corporate wrap platforms offer life insurance they could be subject to two forms of renumeration."

He adds the read across of adviser charging to the GPP market could potentially lead to an uneven playing field. Small thinks a gap could open up between GPP and trust-based defined occupational schemes which, although they might look similar, will not be subject to the same disclosure rules.