What do customers really want to know?

Here's a quick quiz. Imagine you are an average customer. What information do you most want to know about your adviser when you first meet?

If you said 'what range of products do you sell?' or 'what type of adviser are you?', then go to the top of the class. If you said 'I want to know in detail how your fees and commission are calculated - please show me a range of tables to illustrate this', then I'm afraid there are no gold stars for you today.

The FSA has recently been consulting on what should replace the Menu and Initial Disclosure Document (IDD), when advisers disclose their services and costs to the customer. As part of this research, they asked people to rank the factors they found important to know about advisers - and the results make interesting reading. Yes, they want to know what sort of adviser they're dealing with, and what products they can recommend. To a certain extent they want to know what level of fee and commission could be payable, although this wasn't top of their list of priorities. And right down at the bottom of the list was how the fees and commission are calculated.

Having carried out this research, the FSA has incorporated some of its findings into its consultation ‘Simplifying Disclosure’ (CP08/3). They propose a single document to replace the Menu and IDD, with many of the more complex elements of the Menu removed. This document would be in guidance instead of rules, which is consistent with principles-based regulation. However, in our response, AEGON has proposed that this could be taken even further, rearranging the information in order with consumer priorities, to make sure that the things people really want to know hit them first. With all the changes the FSA is proposing in its RDR around advisory models, including CAR, it's even more important we find ways of engaging with customers. We could usefully start by telling them the stuff that's important and which will help them make decisions. Let’s encourage some radical thinking here, and really get it right.

Alison Gay
Senior Business Regulation Consultant

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The educational road to professionalism

At the end of April Francis McGee gave our ‘quick take’ on the RDR feedback statement. As he said, it was a very green paper in parts but professionalism, and qualifications in particular, was one of the more developed sections.

In line with market expectations the FSA has confirmed that in the brave new world advisers will need to hold a QCA Level 4 qualification, such as the CII’s Diploma.

We see this as great news. It means that those who want to operate at the advice level now know what the benchmark will be. For some IFAs who only hold the early versions of the FPC to reach this benchmark could seem a daunting task. However, we believe it’s achievable with sufficient time and effort. With potentially six papers to take – with at least four at the Diploma level (which is set at the level of the first year of a bachelor degree) - we would encourage advisers to start studying early.

Of course, many advisers are already part way towards the Diploma, and some advisers are already at or above the Diploma (or AFPC as it used to be called). The FSA feedback statement suggests individuals and firms may get a regulatory dividend for going beyond the Diploma. What exactly this will mean is unclear, especially as the FSA has appeared to rule out financial dividends such as lower regulatory fees. We think that ignoring fee reductions is a mistake as this would be the clearest and quickest way of stimulating change.

The last intriguing comment is that the FSA is keen to explore a non-exam alternative to the Diploma. This is puzzling as the most likely ‘assessment vehicle’ is the new ISO 22222 standard for Financial Planners. This is a great standard, which we fully support, but to achieve the ISO an adviser will need to have completed (QCA Level 4) examinations.

The road to professionalism may seem long and winding but it is achievable and the first steps need taking now.

Peter Williams
Head of Industry Development

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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.