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Aegon chief issues warning over light-touch advice regulation


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.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. So RDR has failed the mass market, as everyone apart from those self appointed experts at the FSA/FCA predicted, and they are now suggesting a lighter touch regulation regime – probably delivered by the banks who have such a great record in this area.

  2. A provider doesn’t want a route for lighter-touch advice allowing advisers to reduce fixed costs and liabilities enabling them to reach a wider market? He thinks it would be better to let people sell direct with a nice decision tree and a couple of multiple choice questions. Well knock me down with a feather. Would this guidance be provided direct by Aegon after they contact advisers clients directly and ask if they want to pay an adviser or have them do it at no cost? Hmmmmm, let me guess…..

  3. Take The High Road 13th August 2015 at 1:21 pm

    Well said Mr Grace….as explained, the banks and some of these previous defunct sales operations are just waiting for this to happen in order to start earning commission(sorry,adviser charges) again!

  4. These providers/insurers will be the same ones who failed,or chose not to see the potential for an advice gap ‘prior’ to RDR and lobby for a deferment or review of its introduction. I believe that some probably thought that their margins on sales would be much better without up-front commission to fund! Well here’s something…. You’re all too late now, review or not, any solution will be a watered down version of what we should have, so why not put your time and resources into supporting the remaining advisers who can help you, by arguing the case for changes to the shape of FSCS funding, before that is too late also!!!

  5. He’s basically correct so the way to improve the delivery of top quality mass market advice is to reduce the costs and liabilities to advisers. Make this profession attractive again.

    Firstly the fees for the F-Pack should be around £500 an adviser and it should be easy to calculate what your fees will be so that you can plan your business.

    Secondly the FCA needs to work with advisers with sensibly worded and easily understood rules so that there is no longer a need to employ expensive compliance consultants. The existence of compliance consultants is the greatest indication of regulatory failure. They are 100% necessary at the moment, but they shouldn’t be. How can a business succeed when those that practice it find the requirements so incomprehensible that they have to employ a third party to make it understandable?

    Finally both clients AND advisers should be able to appeal FOS decisions through the courts. We need to bring in a long stop and accept that most clients are intelligent people and when they make a decision to invest they need to take some degree of responsibility.

  6. What business of providers is the way in which advice is provided? Stock to your knitting Mr Grace.

  7. The problem with the current approach is that one size does not fit all.

    For many on middle and low incomes the full RDR Is not appropriate, due to cost.

    These people need advice/guidance for a cost they will be willing to pay. Often for the sensible reason that it is not cost effective for them.

    To take one example, I could speak to a mortgage adviser for a fee and if I had a large mortgage the savings would justify the cost. However, with a small mortgage the fees would exceed the potential savings.

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