In its response to the FSA’s RDR consultation paper, Aegon says proposals for greater professionalism under RDR should be extended to the protection market, including Icobs advisers, but adds: “In a way that recognises the competencies and expertise required to advise effectively in these markets.”
The Royal London Group, parent company of Bright Grey and Scottish Provident, agrees. In its response to the consultation paper it says: “The position of protection specialists and holistic advisers would be improved if some of the ideas around professionalism contained in the RDR were extended to advice on protection products.”
The group says membership of a Professional Standards Board with a published code of ethics should be seen as essential for all those offering protection advice.
It says: “Equally, higher level of qualifications suitably tailored to the needs of protection advisers, should be introduced before any large scale reform of remuneration on protection products is considered.”
Last week Money Marketing revealed that commission is likely to stay for protection sales post-RDR. In its response to the CP, Aegon says commission should be allowed to stay, but says commission disclosure should be made compulsory for both Cobs and Icobs.
Aegon says there is no evidence that current remuneration practices create consumer detriment, and there is no evidence to suggest that consumers will be prepared to pay a fee for advice on protection products.
It says: “Because protection is a competitive, rate driven market, the degree to which customers are disadvantaged by any bias towards higher commission-paying providers is limited. We would recommend FSA allows the retention of commission within this market, albeit with the important enhancements to disclosure we suggest above.”
However, its says commission disclosure should be made compulsory for both Cobs and Icobs.
Royal London says there would be a risk of considerable consumer detriment if the principles of adviser charging were imposed on the protection market.
It says: “We are certainly not against greater transparency in the pricing and charging of protection products. However we feel there should be more of a gradual, sustainable approach to the introduction of transparent product and advice charging.”
The group adds: “There is a very real risk that consumers will be put off taking advice for protection as the cost of the advice is likely to greatly outweigh the perceived value of the advice service. This may lead to a widening of the protection gap.”
Aegon would also support strengthening of capital requirements for firms that operate under Icobs as well as Cobs, and warns the protection market could be adversely affected by the proposed ban on provider factoring.