The Financial Services Consumer Panel is calling on the FSA to introduce a limited advice service for with-profits policyholders to be provided through specialist individual firms and trade bodies.
The FSCP has released a report on the 8 million with-profits customers who cannot get independent advice on their policies because their funds are too small to generate a commission for advisers and says there is a “rising tide of consumer discontent” around with-profits.
The FSCP makes three key recommendations which are: providing some form of focused advice on with-profits policies; ensuring that independent representation of policyholders’ interests is genuinely independent of the company board; and making communications from companies clear and understandable.
FSCP Chairman John Howard says: “Consumers feel locked into these products by MVRs, which, understandably, they regard as penalty charges, while the so-called ‘independent’ committees meant to protect consumers are often packed with company men. Not surprisingly the closure and sale of with-profits funds, even though some have performed well, has been accompanied by a rising tide of consumer discontent.”
Informed Choice director Martin Bamford says: “Anything that makes access to advice to people in closed with-profits funds is good but caution needs to be exercised as to who gives this advice as it is a specialist area.”
An ABI spokesman said: “The industry has done a lot of work, with the FSA, to improve the information provided to all with-profits customers, and this work continues. So we will study this report. Regulatory requirements can often force providers to include unnecessary information that can cause more confusion for customers and we are constantly looking for good ways to make information clearer and more accessible.
“With-profits providers are rightly required to provide customers with the information they need, but not detailed financial advice. Information might lead customers to seek further professional financial advice, in which case they should contact an IFA to see if they are able to help. Anything the FSA can do to free up this market and provide IFAs with the confidence that they can give advice would be welcome.”