The FCA’s final guidance for annuity comparison websites has been slammed as a “cop-out” for failing to create a level playing field between advised and non-advised services.
The regulator last week published guidance for annuity comparison websites after a review found the websites are misleading and failing to provide consumers with adequate risk warnings.
The FCA says it will not extend the guidance to lead generators despite industry calls to do so.
It has also rejected a suggestion to describe commission as a “non-advised fee” on the annuity websites, and says sites do not have to express commission in monetary terms.
In February the FCA consulted on guidance on what constitutes a fair, clear and not misleading annuity comparison website.
The guidance says annuity comparison websites must have “sufficient information and relevant warnings” on a number of areas, including whether a restricted panel of providers has been used.
Websites must also explain whether the service provided is advised or non-advised and what the commission or charges will be.
The FCA says some respondents asked whether commission and charges should be expressed in monetary or percentage terms.
Another respondent said the term “non-advised fee” should be used in place of commission, so that consumers are aware the payment comes out of their pension fund.
But the FCA says introducing a new term “has the potential to cause confusion”.
The FCA says: “Commission and charges should be presented in a way that is fair, clear and not misleading.
“Consequently, whether they appear as a percentage or monetary figure will depend upon the context and individual circumstances of the consumer. So we would leave this decision for firms.”
Syndaxi Chartered Financial Planners managing director Robert Reid said: “This is a cop-out by the FCA. Non-advised websites have been getting away with a lack of transparency for years and the FCA must not shy away from making difficult decisions if we are to achieve proper consumer protection and a level playing field for advised and non-advised channels.”
Key Retirement Solutions assocxiate director Billy Burrows said: “These rules should be extended to lead generators. It would be helpful if there was more of a level playing field between advice and non-advice, particularly given the focus on simplified advice following the pension reforms in the Budget.”
The FCA needs to take a proper look at the standards which should apply to all non-advised broking services, and not just annuity comparison websites. The FCA has not got to grips with non-advised broking and it is absolutely vital that it does so with the pension freedoms announced in the Budget.
It is very odd that the regulator is allowing non-advised websites to continue to express commission in percentage terms. If that is indicative of the direction the FCA is taking between now and next April when the guidance guarantee is introduced, we are going to have some serious problems.
The regulator must insist firms take adequate steps to ensure consumers genuinely understand what they are buying, for instance, by calling customers who buy a single life annuity to make sure they fully understand the implications.
Alan Higham is retirement director at Fidelity