Think Tank: FSA defends disclosure documents against transparency criticism
Protection providers will have to do more if they are to ensure all customers know whether they are receiving advice or not, according to guests at the latest COVER Think Tank.
Debating the clarity and importance of advice in the sales process, advisers and insurers considered whether standard regulatory obligations such as initial disclosure documents (IDDs) do enough to ensure customers understand whether they have received advice or can take a complaint to the Financial Ombudsman Service.
"IDDs do not go into detail on what it all means for the consumer. What they do not say is that if you do not receive advice you lose the right to redress from the ombudsman. That means something to people, the IDD does not," said Kevin Carr, head of strategic relations at Lifesearch.
The FSA has rejected this assertion, however, and put the onus of advice squarely on the shoulders of advisers.
"The IDD clearly states whether the service been offered is an advised or non-advised one.
"In addition, firms also have to confirm to the customer whether or not the sale was advised in the statement of demands and needs," said a spokesman for the FSA.
Guests at the debate also discussed the relative merits of FSA regulation and whether it has proved detrimental to the service customers could expect.
"There are people who want to give advice on this area but since regulation this has become more difficult. Estimates suggest that to sell a life policy an adviser has to talk the client through 130 pieces of paper and they rightly ask whether it is worth all that paperwork," said Roger Edwards, products director at Bright Grey.
Once again the FSA refuted the allegations and has reminded intermediaries that regulation requires the recommendation of the best product - regardless of how long the advice process takes.
"Our rules require that customers buying on an advised basis are recommended suitable products that meet their demands and needs - and that is something that can be enforced where necessary under FSA powers," said the spokesman.
"They certainly do not require an adviser to talk the customer through 130 bits of paper."
In a bid to raise consumer awareness of the quality of protection products they are buying, whether advised or non-advised, Martin Werth, business development general manager at Munich Re, urged the establishment of a simple system to make products easily understandable for consumers.
He said: "We have tried to develop the concept of an essential protection index in which you measure our products out of a rating of five.
"If we can get a simple way of communicating that you are getting less than you realise, consumers will understand why they need advice because a lot of these products are very poor."
