Firms can 'make a judgement' about when pure protection services are associated with investment advice as the FSA settles on a more relaxed disclosure regime under COBS.
Setting out its final transparency rules for investment advisers arranging pure protection contracts, the regulator also says that where an adviser charge has been agreed more than 12 months prior to the protection service, the rules do not apply as the services are "unlikely" to be associated.
Otherwise, the FSA confirms proposals set out more than a year ago: that advisers who arrange a pure protection contract alongside investment advice must "in good time" ensure the client understands how the firm was remunerated for the protection element, including commission received.
Last year, the FSA confirmed it would not be introducing adviser charging into protection, but outlined increased transparency would be required.
In its final rules on remuneration for pure protection sales under the conduct of business sourcebook (COBS), published today, the regulator says transparency is essential for protection services associated with investment advice.
Firms can arrange a single fee for pure protection services and investment advice, but must make it clear to clients how they are being remunerated.
For stand-alone sales, not associated with investment advice, the FSA says its view remains the customer's main concern is the premium he will have to pay, rather than his adviser's remuneration.
The regulator states: "We think it is important the customer understands the entirety of his adviser's remuneration in these circumstances.
"We therefore intend to introduce increased transparency requirements for pure protection services associated with investment advice."
