The Financial Services Consumer Panel is calling on the FSA to introduce a limited advice service for with-profits policyholders through specialist firms and trade bodies.
The panel claims in a report that eight million with-profits policyholders cannot get independent advice because their funds are too small to generate commission for advisers.
It makes three key recommendations which are providing some form of focused advice on with-profits policies, ensuring that representation of policyholders’ interests is genuinely independent of company boards and making communications from companies clear and understandable.
Chairman John Howard says: “Consumers feel locked into these products by market value reductions which, understandably, they regard as penalty charges while 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.”
Aifa director general Chris Cummings says it is difficult for advisers to provide advice to consumers who cannot afford it and that the advice issues are complex and involve risk to the adviser if the outcome is not as expected.
He says: “We agree with the consumer panel that the industry as a whole needs to address this issue. However, we do not see any need for a dedicated trade association and are committed to working with existing bodies, such as the Association of British Insurers and the consumer panel, to improve the position for policyholders.”
An ABI spokesman says: “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.”