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FSA considers extending RU64 to other products

The FSA is considering extending its RU64 rule to other product types.

As part of this week’s discussion paper on product intervention, the regulator says it sees the rule as an important tool for protecting consumers and that it could extend the rule to include other product areas.

The RU64 rule requires advisers when recommending a pension that is not stakeholder to explain in writing why the recommended policy is “at least as suitable as a stakeholder pension”. The regulator was widely tipped to scrap the controversial rule in 2007 due to the effect it was having on pension sales but found there was insufficient evidence that it should be removed.

In this week’s paper, the FSA says it sees the rule as an important consumer protection tool that could be introduced in other areas.

The paper says: “We could consider extending a similar requirement to advised sales of other types of product. The rule appears to be most suited to investment products with explicit charging structures. But we would welcome thoughts on whether or how it could be applied in other retail markets”.

“This option would not provide a cap on prices. It would still be possible to sell more expensive products where there is a demonstrable need, but it would set a benchmark and encourage greater assessment of the value for money of propositions.”

For a full round-up of the paper see this week’s Money Marketing.


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. What fuels this unavoidable and never ending opinion from the FSA that cheap equals good?

    Do we all only eat value baked beans? Do we all drive KIA cars? Does the entire population shop for clothes at Primark?

    Here is a novel idea, something that is more expensive might just actually be better.

    Could the wizended sages at the FSA consider this, perhaps as they sit in their polyester suits, and plastic shoes, and sip on a flask of coffee they might…

    Or perhaps they will sit in their Saville Row suits, handmade shoes, sipping freshly ground Java, coming out with today’s 14 proclamations to justify their useless and pointless existence.

    You failed, you have been shut down, have the good grace to go quietly…

  2. In other words rather than a Suitability Letter(AKA Reason Why Letter) the adviser will need to produce a lengthy document called a RWNL – Reason Why Not Letter, which once the client is bored reading it he’ll decide after all to do nothing since he is now so bamboozled! Hardly TCF.

  3. Simon, do you simply get so excited that you fail to read things correctly? It quite clearly states tht if a more expensive product is better for the client then that is OK.

  4. What’s wrong with value beans and KIA cars? After over 14 months waiting to be authorised by this crew following the closure of Park Row, this will soon be my only option.
    Great comments Simon – I agree.

  5. Its a pity the regulator didn’t apply RU64 to its own actions and have to justify why its inflated fees are at least “at least as suitable” to market i.e advisers and their clients who ultimately pick up the costs as other options.

  6. Compliant adviser 26th January 2011 at 9:27 am

    RU 64 for investment products now?? and exactly how will that work then? will it include the cost of ongoing service fee or a platform service charge?

    An old quote..The cheapest things in life are not necessarily the best value

    So, is it better to have no Pension at price cap pensions to put them out of reach for those who actually need them, or actually have a pension which admittedly is slightly more expensive. Last time I looked, having something was infinetly better that having nothing!!

    So, maybe shoppers should ditch financial advice and just buy cheap things online. OK, not much in the way of sales going on,and the savings gap will increase, and more will be dependent on the state, but hey-ho, at least the regulators have justified their salary!

  7. & RU64 was a resounding success, wasn’t it? Look at Stakeholder Pensions – not exactly a massive take up was there?

    I have clients who tell me that they are prepared to pay more to have their arrangements reviewed properly, invest in funds other than quasi-trackers run by insurance companies & for me to keep in regular contact. This should be possible with the platform I use, but Lord help us if there is an intention to control costs.

    This is no more than interference & has nothing to do with regulation & the original intentions of the FSMA. We all know that the FSA will cease to exist at the end of next year but they continue to issue dictats at an ever increasing speed.

    This seems identical to the legacy of the last Labour Government – spend as much as you can & impose ridiculously high numbers of policies & rules that any future successor is unable to make much in the way of changes. Ridiculous.

  8. C’mon Simon Carter, why is this a bad thing? When you go to Saville Row to buy a suit they show and explain why it is a better product, the coffee supplier goes out of his way to tell us that cheap coffee is provided at the extortion of the labourers, whilst their coffee is fair trade, with only the best beans making the cut. Is it so bad to explain to a client why one product is better than another? It is clear when a suit fits better and coffees tastes nicer, but it is not always clear why paying an extra x% is better – remember, your clients are not as well informed as you clearly are!

  9. Well said Simon. The only thing I disagree with is that the FSA are useless. It is much worse than that; they have caused immense damage to the people of this country and are continuing to do so, and the IFAs who are championing the FSA in their systematic quest to rid the industry of thousands of good advisers are aiding and abbetting them. Of course they may well regret this, in time.

    You would think that some people had never heard the (often very true) old saying that you should be careful what you wish for.

  10. 30 years ago when I first came into the insurance industry I was taught “never accept the cheapest parachute, brain surgeon or insurance policy” !!
    Quality costs, but quality lasts and does its job.

  11. How (or rather why) does RU64 continue in a world where Stakeholder is no longer cheap and Nest, the government sponsored default scheme for the entire working population, would fail the test?

  12. Yes, Simon Carter is exactly right.
    Buy cheap, buy twice!
    Clients usually buy from the guy they trust. If they get value for money and service, they stay with you. Isn’t that the same with most things we pay for?

  13. Neil F Liversidge 26th January 2011 at 9:41 am

    If cheap equals good, why does the FSA cost so much to run, why do we pay the inflated salaries of its senior management and why isn’t Hector Sants driving a Lada?

  14. er Hello

    FSA why are you considering !!!! – You are history

    No more


    Defunct, etc etc etc

    In fact why don’t you set up FSA Financial Services then at least we know where we stand.

  15. Well done FSA – but look beyond!

    Stakeholder pensions failed. Only around 4 million stakeholder pensions have been sold
    since 2001, inflated by block transfers such as The Building and Civil Engineering (B&CE) scheme. But, B&CE aside, stakeholder pensions have failed against their original objective of spreading pension membership among lower earners because when you remove distribution costs you also remove distribution!

    Another problem is that the means testing rules can make it uneconomic for lower-income employees to save and equally dangerous to sell to these groups.

  16. So, will fee-charging IFA’s have their fees capped under RU64 to make sure their cleints are getting a fair deal?

  17. I have spent the last two years analysing, researching and assessing the merits of every critical illness plan.

    Partly to satisfy my own inner requirement of making sure I know what I am advising on and partly to deflect the insidious view that cheap = best.

    I can categorically prove that buying the cheapest critical illness plan is not best value and the FSA needs to reconsider its theories.

    Yet again a case of those who can’t telling those that can how best to do the job.

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