ABI and CII reject non-advised ban
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The Association of British Insurers and the Chartered Insurance Institute say they are against the FSA’s proposal to ban non-advised sales of complex products.
The FSA published its discussion paper on product intervention in January. It proposed a ban on certain products being distributed through non-advised channels where they are particularly complicated or where there is a high risk of consumer detriment.
The consultation period ended on April 21.
In its response, published last week, the ABI says: “We are generally sceptical of proposals which effectively force consumers to spend money on advice that they do not require or wish to take.
“It may also exclude certain consumer groups from the market by making it more expen-sive and difficult for them to access products.”
The ABI adds that the FSA should not make any judgements on product intervention until the European debate on the definitions of complex and non-complex products has been resolved.
Mifid rules allow non-advised, or execution-only, sales in relation to non-complex financial instruments.
In its Mifid consultation paper, published in January, the European Commission proposed either changing the definition of what is a non-complex product or a blanket ban on non-advised sales.
The consultation closed in February and the final proposals are expected this spring.
The CII says its members are also against a ban on non-advised sales. Its response cites a survey carried out with 1,229 CII members and 742 PFS members.
It found that only 40 per cent of respondents believe the power to prevent non-advised sales would help improve consumer confidence.
The CII says: “In the vast majority of cases, misselling has resulted from management decisions to focus on particular products and to incentivise staff accordingly. These are both issues that can readily be dealt with inside the existing provisions.”
Thameside Wealth director Tom Kean says: “A ban on non-advised sales is patronising and unworkable. How do you decide how complex a product is?”
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Readers' comments (3)
Julian Stevens | 5 May 2011 10:04 am
Not that I'm the FSA's biggest fan, but this proposal doesn't actually seem unreasonable. A number of products are already classified as complex and/or potentially high risk and require advisers to have undertaken special training and/or to have achieved specific qualifications or, for network members, are subject to pre-approval. This seems only to be a logical extension of those requirements. Income DrawDown and many structured products spring readily to mind.
Perhaps, if it hasn't already, the FSA might care to cite a few examples of the products it has in mind, with examples of how and why detriment has resulted from consumers buying them without advice.
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Anonymous | 5 May 2011 10:19 am
So, when I retire from being an IFA (with 20 years experience and Chartered status, and with 2 degrees), the only way I will be able to buy certain 'complex' products will be to seek advice !?!
Most of the 'complex' products are only complex to the poorly informed people who work at Canary Wharf. Because they have difficulty understanding easy concepts and a bit of small print, they assume that everyone else is as poorly equipped.
Even now, they will not accept Caveat Emptor.
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Anne Uity | 5 May 2011 10:48 am
People may not wish to take advice (because of the cost) and feel they can "wing it". However I would not attempt to fly a helicopter without having a fully qualified instructor next to me!
Obviously though I would not want that instructor to be paid through a targeted sales structure. I could end up paying over the odds to be put into crock which the instructor has convinced me is the best in the market!
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