Off the Menu - and the Menu's off

From depolarisation through to the Retail Distribution Review, the FSA has tried hard to solve what it calls 'information asymmetry and principal-agent problems'. Despite the rather opaque terms used, real efforts were made post-depolarisation to give customers better information. Disclosure documents were designed to help customers understand more about an adviser's services, the costs, how these compared to a market average, and the options for payment. At the same time, it was hoped these documents would once and for all remove any actual or perceived bias.

However, a combination of European rules and consumer research, showing the documents weren't achieving their objectives, led to the FSA lifting the requirements on advisers to provide them.

So where do we go from here?

The FSA's latest consultation, ‘Simplifying Disclosure' (CP08/3, for those who like the numbers) outlines what might happen in future. The lead proposal is for a single document, containing elements of the Menu and IDD (Initial Disclosure Document), but with more scope for advisers to tailor the format and content. Rather than prescribing rules for disclosure, in future the FSA will provide guidance - a further example of a move to more principles-based regulation. This approach is also in line with MiFID, whereas the compulsory Menu and IDD were not.

This all needs to be considered alongside the RDR proposals for Customer Agreed Remuneration. The FSA clearly wants adviser remuneration to be agreed between adviser and client with no interference from providers. Advisers will have increased responsibility to consider, explain, and, if necessary, justify what is a reasonable level (and shape) of remuneration at individual client level. And disclosure material will play a big role in this.

If you have strong views, let the FSA know - the consultation is open until 19th May.

Alison Gay
Senior Business Regulation Consultant

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Important note

This blog provides the views of our industry lobbying team. The views are the opinion of the person writing the entry of the blog and don't necessarily represent the views of AEGON in the UK. They are based on their interpretation of industry developments and their current understanding of UK proposed and actual legislation, and should not be interpreted as recommendations or advice.