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Consumer Panel raises alarm over non-advised drawdown sales

The Financial Services Consumer Panel has raised the alarm over non-advised sales of income drawdown from next April.

Speaking at the Taxation of Pensions Bill committee hearing yesterday, FSCP member Teresa Fritz said the prospect of growth in non-advised drawdown in the wake of the Budget reforms is a major worry.

Pension providers have already raised concerns about savers entering into complex drawdown contracts without taking financial advice.

Earlier this year, the FSCP published an influential report highlighting a growth in problems from the use of online non-advised annuity sales.

Fritz said the issue of non-advised sales is even more urgent with drawdown and could see customers sold inappropriate products.

She said: “The big area of concern is the growth of non-advised streams. It was worrying enough with just annuities but is more worrying with complex products like income drawdown. For regulated IFAs it should be business as usual, they will just have more customers.

“If they have gone down that route [of non-advised] then a lot of consumers don’t understand they have gone down a route without protected regulated advice. Execution-only services can look very much like advice. That is the big difference – you don’t have that redress to the Financial Ombudsman Service.”


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. I don’t see what the fuss is. They will have access to “guidance2 and can then make perfectly valid decisions about going into execution drawdown products fully understanding the consequences of what they are doing.

    Or, maybe, it is slightly more complex than that?

  2. I cant agree more Teresa !!!

    Especially your last statement !!!

    “If they have gone down that route [of non-advised] then a lot of consumers don’t understand they have gone down a route without protected regulated advice. Execution-only services can look very much like advice. That is the big difference – you don’t have that redress to the Financial Ombudsman Service.”

    This also needs to be put in bold when people go to CAB, TPAS, MAS they will not be getting advice in the true sense of the word ! and as for execution only ? well if it looks and smells like advice it probably is !!

  3. AT LAST. The Consumer Panel gets it right!!

  4. Hargreaves Lansdown anybody

  5. what shocked me about the non advised annuity providers was the amount they got paid. I have seen figures of 5% of the annuity. This is more than it would cost for a fully advised service. Crazy situation.

    Drawdown and the new flexibility is going to be a feeding frenzy for the unscrupulous businesses out there. you only have to read some of the media blogs (money mail is a great laugh) out there to realise the level of ignorance about the rules

    As pointed out this is great for the adviser community if done correctly, however the consumer panel needs to be worried. I am.

  6. What absolute nonsense. So an annuity which locks individuals into a product which has the triple challenges of no capital flexibility, inflation risk and longevity gamble does not need advice but if an individual defers buying an annuity for a while this does. The consumer panel would do better to have more analysis and thought behind their statements. They do consumers a disservice

  7. AT LAST. The Consumer Panel gets something right!!!!

  8. Of course there are concerns.

    But as many consumers either don’t want to pay for advice or think they know better this could go badly wrong for some.

  9. Do you think the FCA will fine Mr Osborne ?

  10. The problem will be that even if a statement such as “YOU SHOULD SEEK INDEPENDENT FINANCIAL ADVISE FROM A REGULATED SOURCE BEFORE PROCEEDING WITH THIS ARRANGEMENT”, was to be made mandatory, it would be put by certain parties in small print at the very back. Just look at open market options and how they have been placed in any providers paperwork.

    There has to be a clear distinction made to consumers of the difference between an advised case, guidance, execution only and the consequences. If this is not made clear, advisers will be blamed as unfortunately they do not understand the difference. This is to include educating the Government and the media, as all to often it is blamed on so called advisers, who are in fact unregulated individuals and companies.

    The Government and the regulator believe consumers are going to read their guidance, yet we all know most will look at the book they send out, illustrations from providers and other information, which will be the equivalent of reading The Lord Of The Rings followed by the Hobbit in warning notices and do nothing.

    The only solution that would offer consumer safety and correct outcomes is to insist on regulated advice for all draw down cases. The irony being there are not enough of us left and the cost now would be to high.

  11. Not that I want to be pernickety or anything but Teresa Fritz should get her language correct. If it is non advised drawdown then by definition there can be no miss-selling, miss- bought, yes. That aside if the government or FCA (you know they’re the ones who their chief exec stated to the TSC that very much sees the FCA as consumer champions) were in any interested in this, they should simply ban any provider from allowing anyone into drawdown unless it has been advised.

  12. There are considerably more benefits to regulated financial advice than simply the protection afforded to consumers and the benefit of the FSCS! That is not a primary reason for taking regulated financial advice surely?

  13. ER…. why only drawdown? What about all the other non-advised financial products. Life cover on own life with no trust bought from Tesco.

    Unfortunately nothing concerning finance is simple. Indeed as Martin Bedford succinctly pointed out recently; this is what advisers should be (or are already) doing. Simplifying the complicated for the uneducated or unaware.

    Now FSCP where does that leave you?

  14. No comment from Hargreaves Lansdown?

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