Proposals in today’s FSA retail distribution review interim feedback statement to create a simplified market, distinguishing between advice and sales, could risk leaving millions of people without access to professional financial advice says AEGON.
FSA proposals for a single tier of independent advice and a widening of non-advised sales channels are open for consultation and are very green as FSA recognises the impact this could have on access to advice.
Lack of consumer access to affordable advice was one of the key problems FSA highlighted and sought to address in its discussion paper published last June. However AEGON believes today’s proposal for a single advice model place greater emphasis on building the sales side than closing the advice gap.
Market changes such as the introduction of personal accounts and the establishment of a national Money Guidance service mean people are increasingly expected to make their own provision for their financial future. AEGON believes this will lead to a greater demand for a range of levels of advice to meet differing consumer needs.
AEGON’s consumer research found people wanted to access the advice market in different ways according to their particular needs and level of knowledge. The research showed consumers’ trust and confidence in the advice process could be improved by separating the advisory and selling processes and by making clear how the services are paid for.
Francis McGee, head of corporate affairs, says:
“Having been told their original ideas were too complicated, FSA has now gone for extreme simplicity. But they immediately clock the risks in this: a smaller professional advice market overall and disruption to millions of customers’ existing relationships. The emphasis of the review has moved substantially since last June, but this is still a very green options paper. There is lots of work to do between now and October.”
“We mustn’t focus on building the sales side at the expense of the advice side. One of the original aims of this review was to bring affordable advice within the reach of more people. But the headline option for a simplified market leaves a huge gap between regulated independent advice and non-advised sales and Money Guidance.
“FSA’s new definition of independent advice is much more in line with customers’ intuition, but we should also look at how we can develop new advice models to meet people’s needs and turn that into reality. As long as people are clear about the type of advice on offer and how it is paid for the trust and confidence issues will be addressed.”
Notes to editors
- FSA launched its review of the retail distribution market in a discussion paper published in June 2007. The FSA has identified five problems with the individual retail investment market, summarised below.
Difficulty in understanding the risks, commitments and ‘price’ of the product.
Adviser remuneration can sometimes encourage behaviours which don’t necessarily best meet customer needs – both initially and on an ongoing basis
Issues with advice or product performance take time to emerge by which time the firm originally responsible may not be around anymore. Current capital and PII requirements offer only partial redress solutions.
Many consumers can’t afford full advice or can’t find an adviser prepared to advise them.
Relatively low levels of training or qualifications create trust issues.
- AEGON conducted consumer research using a ‘deliberative’ research method to obtain the views 82 consumers on their ideal adviser. In a 1.5 day workshop people were encouraged to discuss their attitudes to financial planning and given a ‘blank sheet of paper’ to design an advice solution they would have confidence and trust in and that would encourage them to start and keep going with their financial planning. Participants were in the £20-50k earnings bracket, selected to represent a cross section of the population. From these initial findings AEGON identified five advice concepts – financial guru, financial coach, personal shopper, drop-in centre and financial superstore - and tested these in a further workshop with 17 people from the initial wave of research. Further information can be found at http://www.aegon.co.uk/industry/shaping-our-industry/research/opinion-leader-research/index.html
- AEGON UK has assets under administration of £52.3 billion and employs around 4,500 staff. AEGON UK is part of the AEGON group, which is one of the world’s largest insurers and has assets under management of £245 billion.
Francis McGee
Margaret Robertson
