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Ease of communication

It is mildly heartening to learn that the FSA cannot get away with ignoring European law. Had it taken the trouble to undertake anything in the way of consultation, a great many people in the UK financial services industry would have told it that the menu and initial disclosure document were highly unlikely to be the most effective means of clarifying for consumers the issues of advisory status or commission.

How much cheaper, less bureaucratic, less wasteful and more effective it would be if it were made mandatory for such matters to be covered in letters of recommendation and for all letters of recommendation to be provided to clients at least a week before they were invited to sign any application forms or write any cheques.

The first paragraph of the letter could read: “Our regulatory status is that we advise on the products of [either] just one company, namely XYZ Life [or] just three companies, namely ABC Life, DEF Life and XYZ Life [or] all the companies that make up the marketplace, irrespective of whether or not we would advise our clients to commit any of their money to a particular company or any of its products.”

The penultimate paragraph could read: “For arranging this pension plan/investment/ life insurance product for you, John Smith Financial Consultants will be paid by XYZ Life commission of £1,000.” Who could reasonably argue with that? Just how much more complicated than this does it have to be?

Why is the FSA so reluctant to engage with the industry in any sort of dialogue on such matters? Why is it that if there is an easy way of doing something and a hard way, the FSA seems to choose the hard way? How can it be that the FSA will not be able to come up with any practical alternative to the menu and IDD before November 1? Perhaps the people at Canary Wharf might care to shed light on these questions?

Julian Stevens
Partner, Harvest IFM


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