Aifa director of policy Andrew Strange says the FSA has given too little time for an industry wide consideration of the issues and says there is insufficient evidence to justify implementing proposals for the retail financial advice sector into the corporate pensions market.
Strange says: “The corporate pensions market is a complex and unique area of financial planning. I am concerned that we have been given far too little time for an industry wide consideration of the issues within this market, and that RDR concepts designed for the retail market are being forced upon the corporate sector. Also, the attempt to look at the market in isolation from other aspects of the RDR proposals, such as factoring, is also fraught with potential problems.
“There is a real danger that an unintended consequence could be reduced access to regulated advice. The proposals could destabilise a well organised, consumer driven market. With the shift from DB to DC pension schemes employees are in ever greater need of advice on pension planning.
“FSA must ensure its proposals do not make it even harder to access professional financial advice. A significant unintended consequence of these proposals could be firms promoting direct-offer pensions without advice to consumers. This would be a backwards step and would reduce consumer access to advice.”
Aifa is also concerned that the proposals will create an unlevel playing field between Financial Services and Markets Act authorised advisers and non-FSMA-authorised advisers.
Strange says: “Advice to employers, even when identifying a specific GPP provider, does not generally amount to a personal recommendation and is therefore outside the scope of FSMA. In applying the RDR to authorised advisers, FSA will unintentionally create an unlevel playing field in the areas of qualifications and professionalism, between those caught by the wider RDR proposals under FSMA and those who are not.
“Our research disputes the FSA’s claim that the ‘predominant market model is for GPPs to be promoted to individual employees without personal advice’. When questioned, 93 per cent of IFAs offered advice to an employer, which is generally out of scope, but 71 per cent also offered personal advice to employees. This suggests that the vast majority of IFA GPP business is conducted with individual regulated advice.
“FSA’s proposals will therefore create a significant imbalance between FSMA and non-FSMA sectors. This could drive advisers to switch sectors, which would reduce access to individual personal advice. This would run counter to FSA’s proposals and the wider interests of UK public policy.
“Aifa would welcome engaging with the regulator to consider further research on this issue, which was not possible under the current time constraints.”