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ABI chief blames contracting-out problems on IFAs

The Association of British Insurers chairman has effectively washed providers’ hands of contracting-out misselling, saying responsibil- ity lies at the door of advisers.

Speaking at a Treasury select committee meeting this week, the ABI’s Keith Satchell responded to MP’s concerns about the potential misadvising of some groups to contract out, saying adv- isers handled the majority of this business.

However, the ABI chairman’s attempts to blame the advice sector for any potential consumer detriment in contracting out have been rejected by a senior Treasury select committee member.

Labour MP Jim Cousins said this argument was a “cop-out” faced with the potential scale of the problem – with up to 11bn contracted out each year – and a lack of clarity as to whe- ther it has been in the consumer’s interest.

Satchell admitted that providers do give some kind of guidance on the issue but emphasised that most of the business took place in the adviser arena.

He said: “Most of this business was transacted in the independent adviser marketplace. Providers give some sort of guidance but we are not the main sponsor.”

He said clarity was required between what the distributor is responsible for when giving advice to a cli- ent and the type of guidance that product providers give.

Money Marketing repor- ted last week that the pens- ion industry was trying to fend off a 3bn review into contracting out which could hit advisers and providers.

Cousins said: “That is a bit of a cop-out. This is a big component of the welfare system and it is important to be clear whether this huge scale of investment of contracting-out rebates has been good value for the consumer.”

Aifa director general Chris Cummings says: “Not forg- etting successive Governments’ responsibilities, a simple review of figures shows that the majority of business was conducted by tied adv- isers rather than IFAs, a point that seems to have been forgotten by some.”

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