Ron Sandler’s proposals which sought to provide solutions for the long-term future of the savings industry was published yesterday.
The review sought to propose a straightforward agenda through which the government could close the savings gap between lower income consumers and the better off.
Among other issues, the review recommended the simplification of finance products and felt intermediary advice often caused more problems than it solved.
The review was broadly welcomed by the majority of the financial services industry including the FSA, AITC and ABI but provoked outrage from others, including Fidelity, the UK’s largest fund management company in specific areas.
Fidelity said the report was ‘fundamentally flawed’ and ‘would do little if anything to improve the savings habits of UK investors.’
The report’s recommendation to redefine the role and remuneration of independent financial advisers is also based on some ‘erroneous’ assumptions asserted the fund house.
Fidelity said: "We are fundamentally opposed to the concept of a ‘one size fits all’ investment product, which takes little or no account of suitability, and deliberately factors out the valuable role played by independent financial advice,” said Fidelity.
“This is one more example of the ‘nanny knows best’ attitude favoured by the current government and can only serve to stifle competition. We firmly believe that the vast majority of investors should seek financial advice before making a commitment to long-term investment."
On the subject of Independent financial adviser remuneration, Fidelity said: “Sandler’s attempt at tweaking the Defined Payment Structure outlined in CP121 still fails to address one key stumbling block in the original proposals — that consumers are not yet prepared to pay separately for advice.”
The fund house warned: “Sandler’s proposals for altering the distribution and remuneration structures of the intermediary market could have far-reaching and unintended consequences, particularly on those most in need of help with their finances. Fidelity’s own research shows that most investors prefer to pay commission rather than fees. All deserve to have a choice of how to pay. Any attempt to force people to pay fees could well end up with them making no investment at all or pushing them into making investment decisions without the benefit of any advice - spawning the next wave of mis-selling scandals.”
Scottish Widows also expressed concern.
“We believe strongly in the value of financial advice and support the importance of consumers having choice in the way they obtain advice. We would be concerned at any steps which restrict the availability or attractions of independent advice.”
Chief executive, Mike Ross welcomed aspects of the review, but commented: "We are concerned that the 1% price cap may limit the availability of advice for these products."
Norwich Union, Aviva plc’s UK life business, however, welcomed the fact that the cost of financial advice is to be made clearer.
“We are pleased the Review recognises the value of advice, particularly independent advice. We are also pleased that, in the proposals for remuneration, the Review recognises that this remuneration can be contingent on a sale. This overcomes a number of the weaknesses within the defined payment system (DPS) under CP121 (the FSA’s ‘Reforming Polarisation’ consultation paper).
“However, we are concerned that any proposals remain practical and cost-effective, and do not result in a reduction in the independent advice sector. In addition, any changes must be made within a transitional period and must be accompanied by a programme of consumer education.”
