The Social Market Foundation says all financial product advertisements should refer customers to the Money Advice Service.
The thinktank’s report, A Confidence Crisis, Restoring Trust in Financial Services, published today, says the move would increase competitive pressure on providers who currently rely on cross-selling.
It says: “We propose extending to all financial products the principle currently behind the open market option for annuities. All product advertisements, including deal offers from firms by email, would refer customers to the Money Advice Service website to consider alternative products.”
The report says the MAS is trusted and the move is necessary because of low trust in intermediaries. Research of over 2,000 people in the report suggests only 38 per cent think IFAs act in their best interests.
SMF senior researcher John Springford says: “Whatever the reality, many people still view IFAs as salespeople.”
But IFAs fared well compared with tied advisers. The research says 30 per cent of people trust multi-tied advisers to act in their best interests and for single-tied advisers that crashes to just 6 per cent.
The report says the RDR is essential to restore trust after the “complicity” of advisers who had been “captured by provider interests” after a string of scandals.
The SMF backs industry concerns that the RDR will create an advice gap and suggests introducing Government-backed kitemarked products for mass-market products or state subsidies for financial advice.
Springford says: “Given the deficit, subsidising advice is unlikely to be music to the Treasury’s ears, so perhaps that is something for the next spending review. The kitemarked products might not be the cheapest available but they would be straightforward and trustworthy and if an adviser wants to sell something riskier and cheaper they have to explain why it would be better for the client.”
Derbyshire Booth Financial Management managing director Greg Heath says: “MAS is still a very new service and an unknown quantity, so to say refer everything to them could be a premature leap of faith.”