Royal London wants FSA to pull back from the cliff edge

26 November 2009 | By Helen Pow

Royal London chief executive of intermediaries John Deane has come out in support of Aifa’s call for the FSA to drop mandatory RDR requirements for existing advisers to reach new qualifications.

Deane agrees with Aifa director general Chris Cummings’ claim that the FSA is imposing an “arbitrary cliff edge” by forcing existing advisers to attain new qualifications by 2012. He says: “I have a great deal of sympathy with what Chris Cummings is saying. He is looking to protect his members but they have a load of clients and the RDR has to be in their interest.

“There are an awful lot of people with a wealth of experience but they are at an age where they do not want to take a lot of examinations.
“I absolutely agree with new entrants having to get qualified to that level. What I would hate to see is the industry losing advisers who are well qualified by experience. There must be practical implementation of this stuff.”

He says the FSA needs to allow time for new people to join the industry and become qualified so existing advisers are not suddenly in a position where clients suffer because they can no longer give advice.

Deane is a strong advocate of bringing group personal pensions under the RDR radar and has called for trust-based schemes, which are not currently regulated by the FSA, to also be subject to the rules.

He says: “The RDR has to apply to group pension business. We cannot have a situation where it does not and I believe we cannot have a situation where it does not apply to group trust business, otherwise there is a danger that you just skew it all into trust business.

“There are many clever people in the industry so if you leave group schemes out, you will find an awful lot of individual policies written as group schemes if you are not careful.”

The FSA has warned providers that it may create new regulations to prevent master trusts being used to duck regulation but Deane insists that Royal London will not be launching such a product.

He says: “Anything that is perceived to be trying to get around regulation will probably get the treatment it deserves. It seems clear to me that the FSA will not tolerate that.”

Master trusts are also expected to be popular after 2012 because employers and employees can get contribution refunds if they leave the scheme within two years.

Deane says: “Refunds will go, it is just a case of when. The Government, from a social point of view, has to encourage as much saving as possible. It looks strange alongside that process, so I think at some point in the next five years the ability to take refunds will disappear.”

He says the FSA is aware of a potential “last hoorah” on commission and the industry needs to act responsibly or risk unfavourable policy respon-ses in future.

Deane is also keen for the ABI to fight the FSA on the use of standard protection rates.

The regulator recently warned providers it would take action against firms that continue to use standard 5, 7, 9 per cent projection rates for cash and cash-like products.

The ABI is likely to take a stand on this issue, claiming that the changes would be very costly and may not benefit consumers.

Deane says: “Consumers need to understand what a range of potential returns might mean in the short and long term and that can be done as part of the advice process. If you just hear the reaction from companies, there is a significant amount of cost involved.

“We also have to be sensible about the timescales in which these changes are implemented and, most of all, ensure there is a clear cost-benefit analysis. There is now a healthy debate going on and hopefully out of that will come a pragmatic solution.”

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