Experts debate whether segmenting advice will lead to consumer confusion
By Johanna Gornitzki
The Financial Services Authority (FSA) has decided not to include protection in the Retail Distribution Review (RDR) as it believes consumers understand the difference between non-investment and investment contracts.
During a filming session with COVER, Andrew Honey, head of insurance at the FSA's small firms division, said the regulator separated products by type to cater for its different markets - something it believes consumers would recognise.
Many commentators have expressed concern over protection products not being included in the RDR, arguing that financial products cannot be dealt with in silos. However, Honey did not think excluding protection would confuse consumers.
"Each product an IFA sells has a different risk attached to it and our regulatory regime effectively recognises that. Consumers understand the difference between a non-investment contract and an investment product and the system we have in place helps maintain that clarity," said Honey.
However, participants in the filmed debate, Stuart Tragheim, director of distribution strategy and business development at LV=, and Alan Lakey, principal at Highclere Financial Services, strongly disagreed.
"I don't see a difference between a protection sell or a pension sell. If we look at this from a consumer's perspective, the most important thing is that they receive appropriate advice," argued Tragheim.
He added: "I don't agree that consumers will understand. Customers won't be dipping in and out of the sales process."
Agreeing with Tragheim, Lakey said: "The problem with the suggestions within the RDR are that they focus on remuneration and concentrate on segmenting the advice. By ignoring protection they are giving out the wrong message because you cannot ignore segments of the industry. You cannot have different layers of advice, different rules or different regulations; that simply won't work."
He added that whatever the outcome, the RDR will affect the protection industry: "You simply cannot layer it in the way it is suggested in the RDR. It won't work."
n The filmed debate, sponsored by LV=, took place in a bid to get the FSA to answer the most common questions about regulation. For the full interview with Honey, Lakey and Tragheim please go to
www.covermagazine.co.uk. ∑
