Aifa has attacked a report from the Government-funded Consumer Focus watchdog which criticises IFAs’ use of trail commission and pensions “churn” ahead of the RDR.
The report, published today, says trail commission, unnecessary pension switching, excessively high costs and charges and opaque pricing of new and old products will pose “significant problems” post-RDR.
However, the report draws on research from just 31 client cases over a 10 year period between 2000 and 2010.
Consumer Focus chairwoman Christine Farnish says: “Too many consumers are being persuaded to switch their pension into different products which may well leave them worse off.
“Others are signing up to paying trail commission to their adviser for the life of the product, which may be decades, without receiving any tangible benefit.”
Aifa director of policy Andrew Strange (pictured) says the report adds “very little new information or analysis” to the debate on the provision of financial advice.
He says: “The provision of financial advice and development of the IFA sector is very important to customers. This report unfortunately adds very little new information or analysis to the debate.
“The report appears to be very thin on evidence to back up some of their claims, which are based on a great deal of conjecture and speculation and undermines the conclusions they draw.
“Extrapolating industry-wide conclusions from only 31 individual examples of advice, for example, is not robust research. There is also no attempt to assess the value of advice given.”
ABI director of life and savings Maggie Craig says: “Consumer Focus is a little behind the pace with this report.
“The ABI has strongly supported the RDR from the start, and we want it to be implemented on time precisely because it will help customers know exactly what they are paying for when they buy financial products.
“The industry has done a lot of work to make sure customers understand the way that charges work.”
Hargreaves Lansdown pensions analyst Laith Khalaf says: “I’m not sure what this report adds to the debate because the FSA has addressed a lot of the issues it highlights already.People need to get value from trail commission, but I do not think trail commission is a bad thing per se. It isn’t as black and white as Consumer Focus are presenting it.”
In October last year the Government announced that Consumer Focus would be abolished and that some of its functions were likely to transfer to Citizens Advice.