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Barking up the wrong tree

The new year has begun very much like the old one finished, with a raft of

consultation, discussion and feedback papers from the FSA. Among the six

publications put out by Canary Wharf between Christmas and the first week

of January is the FSA&#39s discussion paper on its proposals for the

regulation of the sales process for Sandler&#39s suite of stakeholder products.

Its Options for Regulating the Sale of Simplified Investment Products

proposes three differing dumbed-down regimes for the sale of Sandler&#39s

products. The first option, termed “Self Help”, provides consumers with

warnings but effectively amounts to an execution-only basis. While the

second, “Guided Self help, uses filtered questions or decision trees and is

the preferred option of the regulator.

The third, “Focused Advice”, comes closest to the current advice process,

with an adviser deciding on the suitability of the product and offering

dumbed-down advice. While potentially flawed, this seems the most

appropriate regime as it at least recognises the need for advice.

For the FSA to outline its preferred option at this stage before the

products themselves have been designed by the Treasury seems somewhat

presumptuous and must bring into doubt the validity of the consultation

process. But more to the point, banging the drum again about decision trees

is naïve as most of the industry view them as a failed experiment and

is tantamount to the regulator burying its head in the sand yet again.

Decision trees have failed to increase take up of stakeholder pensions. How

is it the regulator believes they will work this time? Surely it is time to

move on and come up with a workable format that will motivate the great

unpensioned to change their savings habits.

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