FSA: Industry calls for regulator to take a firmer hand with non-advice sellers
Advisers regulated by the Financial Services Authority (FSA) could see their businesses falter at the hands of information only protection sellers unless the FSA comes down hard on non-regulated advice.
Speaking at a Munich Re workshop on meeting customer demands and needs, Tom Baigrie, managing director of LifeSearch, called upon the regulator to play a firm hand when dealing with non-regulated sellers of protection. Attacking direct non-advice sellers of protection, Baigrie said that FSA rules that only apply to advised sales, place IFAs at a competitive disadvantage.
"Regulation will cause the non-advice sector to dominate, handing them an advantage. Unless the regulator reigns in non-regulated advice as a method of distribution, it will erase regulated advice in the market," he said.
However, Baigrie stressed that the FSA's treating customers fairly (TCF) initiative should bring information only players back into line. The guidelines, which apply to both advised and non-advised sales, set out practices for those selling financial products, including details of what customers should be told in terms of a product's coverage and what advisers should obtain to ensure customers are sold suitable products.
"As of today, the worse your advice is, the more you can pretend it is simple and the more you can sell. However, the cavalry is loitering. It is there in the TCF initiative, which - joy of joys - applies to all the market," he said.
Backing Baigrie's concerns, Laurence Baxter, senior policy adviser at Which?, warned IFAs that a lack of understanding among consumers regarding what denotes advice, means IFAs must ensure they meet all their customers' needs.
"Do consumers realise they are receiving advice? There is confusion between what is advice and what is information. There is nothing in the sales process that shows consumers are receiving non-advice or advice at the beginning of the sale," he said.
Reidy Flynn, senior policy adviser at the Financial Ombudsman Service also told advisers to heed caution. "Complaints need to be avoided. In most complaints cases, something has gone wrong at the sales stage. This illustrates the importance of understanding the product being sold."
