Loosening regulatory requirements to encourage firms to offer simple, low-cost advice solutions risks encouraging “cowboy tactics” in the sector, Aegon UK chief executive Adrian Grace warns.
Earlier this month, the Treasury and the FCA launched a joint review into the advice market to establish how it could function better for consumers.
The review will be supported by an advisory panel led by Scottish Widows chair Nick Prettejohn and will look at efforts to bridge the advice gap and the obstacles preventing the growth of affordable advice.
Last week, two of the UK’s largest insurers – Aviva and Zurich – urged the Government and the FCA to consider lighter touch regulation where advice only relates to a limited range of products.
Aviva UK Life chief executive Andy Briggs said: “At the moment the way the regime works, if people get advice there needs to be a 100 per cent success rate in getting the right outcome. That means an awful lot of people don’t get advice.
“We need to be prepared to slip that 100 per cent. So for example, you should be able to just advise someone on their pension without taking into account other products like existing endowment policies.
“There is a chance the advice won’t be fully optimal but, for the vast majority of people, the outcome will be much better than if they get no advice at all. We need some pragmatism from the regulator.”
However, Grace warns any loosening of advice requirements could have severe unintended consequences.
He says: “We have to have the same standards across the board. Having set a new advice standard through RDR, I don’t think we can weaken that now because that is not the right thing to do.
“To think that banks or other financial bodies could have lesser standards for providing financial advice is fundamentally wrong.”
Grace adds: “We need to work out how to provide advice to middle England, but a lot of that can be done digitally and through guidance, in partnership with advisers.
“As soon as you start to weaken the regime, you open up a space for a whole series of cowboy tactics.”
Speaking following the publication of Aegon’s second quarter results, Grace also suggests the insurer is open to offers for Origen Financial Services, the advice business it currently owns.
He says: “We will not buy into distribution again because that is not part of our strategic future.
“We still own Origen and we have a share in Tenet, and neither of those things do us any harm.
“But given back-book liabilities and all the other things associated with these firms, there is not a huge market in terms of selling them. It is difficult to dispose of something like that.”