AIFA praised the proposals for a clear demarcation between advice and sales; the requirement for 'advisers' to be whole of market; and the calls for higher professional standards. AIFA, however, issued a word of caution, stressing that the review still has a long way to go and that the IFA profession must continue to make its voice heard before the FSA's next RDR paper in October 2008.
Chris Cummings, Director General of AIFA, said: "We're pleased that the FSA has been true to its word and put the needs of the consumer at the heart of its proposals. Given the economic climate, consumers need professional financial advice now more than ever. From the outset, we have said that the RDR should enable more consumers to get access to better financial advice. Consumers have a right to know whether or not they are being advised or sold a product, and they must have a choice over how they pay for that advice."
But the new proposals could prove costly for customers, according to the British Bankers' Association (BBA). The BBA is concerned that any proposals to curtail or ban tied advice, where a bank advises only on the range of products it provides, would force customers to choose between paying a fee for advice and using a non-advised service. This could have a significant impact on customers' access to mass-market, cost-effective, key financial products. This would impact most on those who may lack adequate savings or investments, and would conflict with various FSA and Government initiatives to encourage people to save for their future.
The association said that it will be following up its concerns with the FSA and will in particular want to explore whether the FSA's concerns on consumers' perception of sales and advice can be addressed through improved disclosure.
The FSA's paper includes proposals for a three tier market:
1. A new look, single tier professional advice sector with higher standards than today, built on advisers acting in the long term interests of their clients
- To be called an adviser, the advice offered must be whole of market.
- The remuneration model must be determined without input from providers, but adviser costs payable through the product are permitted.
- Qualification levels need to increase, but to a level more aligned with Diploma than Chartered status.
- The tied and multi tied community will not be able to operate as financial advisers, or be allowed to infer to consumers that they are offering advice.
- This will be strictly 'non-advised' consisting of guided sales and execution only and can operate within the current regulatory framework.
- The FSA will only change regulations to introduce a new sales regime if the industry makes a strong enough case for it.
- Designed for consumers who are currently alienated from the industry, it will provide basic guidance on financial matters.
- No product sales or recommendations will be permitted.
- It will effectively act as a triage service, pointing consumers in the direction of sales, advice or self execution.
