A smoothed with-profits-style fund has been dropped from the stakeholder suite of products because of the FSA's concerns over comparisons with unsmoothed products.
The regulator will implement the basic advice regime to support stakeholder products from April next year but although it is confident that investors can understand the concept of smoothing, its consumer testing revealed difficulties in comparing smoothed and unsmoothed vehicles. This is expected to preclude them from the basic advice regime, at least initially.
But Standard Life marketing director Barry O'Dwyer argues that with-profits should be eligible for inclusion in the stakeholder medium-term savings product if an adviser offers only a smoothed option, removing confusion.
O'Dwyer says the firm is gauging intermediary demand for a smooth managed product but it has so far proven muted.
Standard Life believes that as was the case for stakehol-der pensions, a new ring-fenced vehicle would have to be launched which would follow the group's traditional with-profits fund asset allocation but without the guarantees.
The announcement means Prudential's with-profits style PruFund product will not be sold under the guided self-help light-touch sales regime.
FSA director of retail pol-icy Dan Waters says: “We remain concerned about the additional layer of complex-ity that smoothing represents in the context of basic advice and the extent to which the benefits and risks invol-ved can be explained to consumers in a balanced way in that process.”
O'Dwyer says: “It is the difference between smoothed and unsmoothed that is cau-sing the problem. The adviser can solve this by only offering a smoothed product and it can only help the basic advice regime.”