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The FSA has announced what had seemed inevitable given the pressure on them to maintain high standards of suitability in the face of unprecedented consumer concern.
In the forthcoming RDR environment, advisory firms will continue to have full responsibility for the sale of financial products. On the face of it, this seems like a sensible decision. The Financial Services Consumer Panel has always been resistant to the idea of consumer responsibility and reluctant to introduce any degree of caveat emptor into the relationship between advisers and their clients, but this is not without significant drawbacks.
The current indebtedness of many people in the UK is well documented and the result of unparalleled access to easy borrowing. The relationship between lenders and borrowers has long been regulated, but arguably with much to be desired about the resulting outcomes. But how often has a cry of ‘buyer beware' gone up in relation to access to credit cards or loan capital?
Basically, I am really struggling to see why we are happy to let the marketplace polarise so distinctly in the future between those who will be able to afford to deal with well qualified professional advisers and those who will not. Because the gap that leaves behind in the mass market will have no advisory balance to counter the demands to spend, and enjoy now, rather than save to enjoy the future.
The average consumer has multiple routes to credit. They can be accessed quickly and without fuss and the paperwork and agreements required to complete the initial transaction can be finalised within 30 minutes or less.
So why wouldn't a similar environment be appropriate for simple, transparent savings and protection products, designed to minimise the risk to the average consumer and result in a reasonable outcome for the majority? Up until recently it was thought that simplified advice might provide such an opportunity, but with the same qualification criteria as independent advice, and the same suitability requirement, it remains to be seen how the cost and risk associated with the model can be accommodated.
I can make no sense of a rationale that imposes a significant cost on the marketing of mass market savings and protection products whilst leaving the routes to the antithesis of savings easily and efficiently accessible.
Before you think I am advocating additional regulation of credit access for the mass market, I am not. I am advocating a level playing field where people can be made aware of the lifetime choices they make when they choose to save or borrow at an equitable cost. Not one which makes the mass market a ‘no go' area for all but the most basic of savings vehicles, and with it drives away the main opportunity for advice that most people would benefit from.
Note: The opinions expressed by the author are his own and are not necessarily those of the company he represents.
Steve Folkard is head of pensions and savings policy at Axa Life
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Bread & Circuses
I have to say I find it difficult to empathise or sympathise with those who are forever banging on about consumer affordability. In every walk of life there will be people who can afford certain things and others who cannot. That’s why some drive Bentleys and some use the bus. It’s called capitalism. Although your piece doesn’t make it very clear I think you also regret that Caveat Emptor has been ditched. This is symptomatic of the nanny state and also if I may say, the attitude of people who worry about those you can’t afford an IFA. That the FSCP is so dense that it can’t see that ever increasing layers of regulation result in the disenfranchisement of those whose bottoms they so love to wipe, merely illustrates the calibre of people who make up the panel. The idea that the ‘mass market’ has similar access to savings as they do to debt products is a theory that could only have come from a life office desperate for business. The mass market has (even in your own words) shown themselves completely inept and irresponsible. That they are now sinking under a mountain of indebtedness is no ones fault but their own. Easy access and cheap money is no excuse at all – no one forced them to take it. In my view you SHOULD be advocating additional regulation for credit access. It should be made much harder. If we want to wipe the noses of the mass market that is PRECISELY where we should start. What on earth is the point of saving if you are in debt and paying interest at a level several orders of magnitude more than the interest (or growth) that is achievable with your savings? I’m sure you too must be old enough to remember credit control – why has this been forgotten? Because the politicians want (as ever) to give the masses bread and circuses. Has the world gone mad – or am I loosing it?
Posted by: Harry Katz
Director
Return To Direct Selling I could not agree more with Harry Katz's take on Steve Foulkards article. Since insurers instigated the RDR through their lobbying of the FSA by the ABI, their agenda was to clearly regain distribution. They complained to the FSA about IFA "churning" and reduced profits, when their own members were encouraging this practice. They could also see that IFA's were increasingly offerring unbundled products, effectively bypassing the insurer. The FSA also maintained that advisors were not serving the public, judging by the complaints that were recieved. This proved to be another myth, with sales advisers from banks and insurers responsible for the overwhelming number of these, as opposed to IFA's. The insurers/ABI agenda aided by the FSA, is to get rid of small IFA's, so that they can once again sell direct to the mass market. By introducing RDR this will effectively kill the majority of small IFA's. If companies like AXA and Aviva then get their way, regulation will be reduced, and mass direct selling (with no guidance any longer availble through IFA's) will once again be the order of the day. Over priced products will become the norm, often missold by the banking distributor. Inevitably this will lead to new regulation, but once again the lessons will have been lerned to late. Sound familiar?
Posted by: Gary Cutting
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Who regulates both and what is the advantage
Agreed............ Perhaps the FSA can explain why saving is so heavily regulated and lending is not when the financial systems practically employed last year due to the disparity in regulation. But then it did mean Golden Brun managed to keep the bubble growing long enough for Teflon Tony to move over so he didn't have to stand and win an election to become PM..............
Posted by: Phil Castle