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‘Don’t throw financial novices to the sharks’

Consumer leader warns regulated advice must be restructured before generic regime can benefit the public.

Generic advice could be like giving individuals water-wings and throwing them into shark-infested waters, warns the Financial Services Consumer Panel.

Speaking at the Resolution Foundation conference in London last week, chairman Jon Howard said the FSA’s retail distribution review must lead to a fundamental restructuring of regulated advice to make generic advice work.

He questioned whether any future generic advice regime would be viable if individuals were then directed to financial advisers who relied on big up-front commission or financial services companies that employed sales targets.

Howard said the retail distribution review was the most important thing to happen since the FSA was created.

He said generic advice could benefit regulated advisers as unsuitable clients would be weeded out in the generic advice process, creating an “escalator of advice” and saving time for more profitable clients.

Aegon chief executive Otto Thoresen, who is heading the Treasury’s taskforce looking into setting up a generic advice service, revealed that the reference group guiding his review will include Sesame chief executive Patrick Gale and FSA managing director of retail markets Clive Briault alongside representatives from organisations including the Association of British Insurers, HBOS, NHS Direct, Citizens Advice, Which? and the Resolution Foundation.

Howard said: “The big question is what do consumers do after they receive generic advice? Where do we point consumers to? We do not want to give individuals water-wings and then throw them into shark-infested waters.”

Aifa director general Chris Cummings says: “We are tantalisingly close to the prize of a better proposition which is worth pursuing. The interests of the consumer must be paramount in these discussions and a better educated consumer is more likely to create opportunities for advisers.”

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