The Association of British Insurers has responded to the FSA's interim feedback statement on the Ret...
The Association of British Insurers has responded to the FSA's interim feedback statement on the Retail Distribution Review by saying it should lead to "a real improvement in the way customers access and pay for financial advice". With that in mind, what else could be done to improve this?
KEITH RICHARDS, TENET GROUP
The Retail Distribution Review (RDR) is one of the most significant projects in the retail agenda and the outcome must bring about lasting improvements for consumers and firms in the retail investment market. The regulator has recently stated that it anticipates meeting the revised timetable.
The position for consumers looks more positive with the 'back to basics' approach to create a clear distinction between advice and sales. However, feedback suggests that it is unrealistic to expect consumers to understand when advice does not involve sales or vice-versa. To some extent the proposals more logically reintroduce 'polarisation' with IFAs at the top of the chain acting as an agent of the client and charging a fee for their service under the proposed principles of customer agreed remuneration. Advisers would more easily be understood to act as agents for product providers and usually remunerated by commission. The sales process needs to be more straightforward with the consumer accepting some responsibility for the informed decisions they make - this could create opportunities for growth in adviser numbers as the regulatory burden and cost to operate would decrease.
Qualifications and competence are key components for consumers. If advisers cannot be confident in the industry, how can they expect consumers to be the same?
ROY CHAPPELL, SCOR GLOBAL LIFE UK
The true test of the RDR's success will be whether insurance buying customers notice any real difference when they come into contact with the industry.
Much of the debate around the RDR has centred on the 'labels' attached to those who advise on and sell insurance, and to the way they are remunerated.
Consumers have little idea of labelling convention or remuneration practice so to change these and expect significantly different results is naive
The industry needs to reach more customers in a cost-effective way and provide products that truly serve their needs. It is that simple.
Some organisations are moving in the right direction. Direct distribution of products is increasingly being offered by providers meaning some protection for formerly served by the 'man from the Pru'.
On the product side, even for high-net-worth broker clients, the same range of protection products have been offered. That Fortis has introduced their new product offering as a genuine alternative to established protection offerings is very welcome.
The point is that the differences must be obvious to consumers and not just to industry insiders. The key message should be to think about what customers need and make what the industry does differently meet this.
SIMON CLAMP, FRIENDS PROVIDENT
The RDR presents an exciting opportunity to develop financial services. The key improvements are to increase customers' trust in the industry and widen access to financial services.
The service provided by IFAs carrying out a full financial review and recommending a solution from the whole of the market should continue to have a special position.
Advisory firms described as multi-tie, single-tie and specialist should be able to provide financial reviews providing they demonstrate the right level of professionalism and operate customer agreed remuneration. It is crucial that customers understand the basis on which they receive these services.
The industry should also broaden the range of opportunities available to assist customers who wish to purchase products without receiving a full financial review and use the Money Guidance service to engage with individuals not normally served by advisers.
The move to higher competence and professionalism will help improve customers' confidence in the industry. Similarly, clearly disclosing and agreeing remuneration and services with the customer before the product is sold will help to increase trust.
By working together, the industry can deliver trusted and professional financial services that are available to all. This will help to ensure that the post-RDR era is successful for providers, advisers and customers alike.
ANDY CHAPMAN, PIONEER.
The RDR proposals have the potential to make a real impact and bring positive change. They should encourage and open up advice and sales services to more consumers and help more take control of their financial situation. However, it could have the opposite effect, with the ongoing development driving many intermediaries out of the market.
The industry must not rely solely on the RDR to revolutionise the distribution model because there is surely more that it can do.
In terms of commission, providers are right to admit they have not helped themselves over the years. If they are competing on commission, it is a fair indication that their products are not up to scratch. Give intermediaries the right tools to the job they should be able to make the right advice and sale. In turn this would negate the remuneration debate to a degree; a happy consumer with the right product is one happy to pay for advice, providing it is correctly disclosed, regardless of whether it is a fee or commission.
Insurers should take some responsibility in educating consumers. The public lack of confidence, and therefore reticence, to engage in financial advice and protection is partially down to a lack of confidence in insurers borne out of negative media coverage surrounding claims payouts. These issues must be addressed if the industry is ever to achieve its full potential - with or without the RDR.
