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Do professional standards for protection need to improve?

Proposals for greater professionalism under RDR should be extended to the protection market, say providers.

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.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. “proposals for greater professionalism under RDR”.

    Based on WHAT?

    Applicable specifically to WHOM?

    In the light of what COST:BENEFIT ANALYSIS?

  2. Another quango to protect the product providers – are they now looking for a feather bed?
    Is there not enough regulation? – if the FSA agree to this it will be yet another layer of regulation – it will only increase costs for IFA’s and consumers.
    Someone has to pay, its is probably somepone who has never had to survive in business but no doubt they have a good salary. Would Aegon like to cover all the industry costs along with those petitioning for it?

  3. We have full risk protect commission disclosure in New Zealand – it is not necessary for every transaction. But I always do it in my disclosure statement. No one. Not one single person has quibbled about the commission. But when I talk about charging a fee for risk advice! Well that is totally different story!

  4. We must recognise that there are many providers champing at the bit to involve themselves in profitable direct-to-consumer business.

    This was reflected in the ABI submissions to the RDR proposals and is also seen in many providers responses.

    It is quite revolting to read holier than thou submissions dressed up in reasonable language which seeks to deflect from the real aims.

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