Key messages include any fees the intermediary would charge the consumer, when these are payable and reimbursable and whether the intermediary will receive commission from a third party.
If the intermediary charges a fee that is percentage-based, it will have to give a representative illustrative example in cash terms.
If the intermediary charges a cash fee that is not clear from the outset because it falls with a range of possible cash fees, its description of its fee must include the minimum and maximum possible fee in cash terms. Intermediaries will also have to note what factors will determine where in the range the fee will be.
If the intermediary charges a percentage fee that is not clear from the outset because it falls within a range of possible percentage fees, then the FSA said brokers must provide a number of pieces of information.
If the intermediary charges an hourly rate and it is not clear how many hours it will spend on the transaction, the intermediary will have to specify the rate in cash terms and outline what factors will determine how many hours are spent on the consumer’s transaction.
The IDD was designed to give consumers detailed information about an intermediary firm so they could make an informed choice whether to buy through it.
Subsequent research by the FSA revealed that consumers neither valued nor used the document, instead relying on what they had been told.
The FSA proposed to replace the requirement to provide the IDD with a requirement for the firm to disclose the pieces of information that would help a consumer distinguish between one firm and another.
For example what its product range was and how it would be remunerated.
Some feedback on the previous consultation paper had misinterpreted the proposed requirement to mean that details of individual staff remuneration had to be given. The FSA said this was not, and is not, its intention.
The FSA proposed that the key messages should have been given clearly and prominently in the initial contact between the firm and the consumer.
Feedback from that consultation paper was in favour of this proposal so the FSA decided it would proceed with the proposal.
The consultation paper said: “Our initial IDD was designed to provide consumers with detailed information about an intermediary’s service.
“However our consumer research found that consumers do not engage with the IDD at the initial stage of the sales process.
“In CP10/28 we consulted on replacing the requirement to provide an IDD with a requirement to disclose key information about an intermediary’s service – the basis of their remuneration and their scope of service – in a clear and prominent manner.
“Most respondents agreed that scope of service and basis of remuneration were the right messages on which to try and focus consumers’ attention.
“Given this support, we continue to consider it sensible to make this change from the IDD to these messages.”
