The FSA has included products such as endowments, long-term care and income drawdown in its menu plans even though it concedes they would not be considered mass-market products.
It says it has tried to keep the menu as simple as possible but it includes products outside those most commonly sold, believing they “have particular risk of detriment” to consumers.
Endowments, drawdown, LTC, investment trust saving schemes, purchased life annuities and FSAVCs will all be included in the menu.
Alongside mainstream products such as pensions, collective investments such as unit trusts and Oeics and whole of life, IFAs will have to tell clients what they charge, either through fees or commission, for these products at the outset of the advice process.
The FSA says endowments are included because they are still high-profile. FSAVCs and purchased life annuities are included because they have a similar structure to other products that are included.
The FSA says LTC sales could increase in the future while investment trusts are included as they satisfy similar savings' objectives to other collective investments.
Inter-Alliance LTC business development manager Jeremy Davies says he understands the FSA's desire to protect consumers in the LTC marketplace but he believes the diversity of products make average commission an inadequate method of helping consumers understand pricing.
Davies says: “An average for long-term care would be meaningless. These products are so diverse in price and make-up that putting them all in the same category for the purposes of the commission market average does not make sense.”
The Bureaux managing director Peter Quinton says: “It is correct for drawdown to be included in the menu.It can have higher risk than other products and needs to be advised upon fully.”