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Industry demand for &#39more details please&#39

More than six weeks after CP121 was published there is still a feeling throughout the industry of not knowing what the whole thing is really about.

Much has been said, written, debated and argued about what exactly is the motivation behind what the FSA is trying to achieve and there is little approaching a consensus of opinion over many of the issues.

Providers, IFAs and trade bodies are calling upon the FSA to release more details about its plans so that they may begin to make decisions about the direction they should take their businesses.

Scottish Life head of communications Alasdair Buchanan says: “There is still a feeling that what we have is not enough to base any decision on or take any firm views. We need a lot more detail before you can plan anything for the future.”

The prevailing opinion seems to be that if this is really going to be a true consultative process then the FSA has to get involved in substantive discussions with the industry and not stand back and let suspicions and misinterpretations develop.

Clerical Medical head of strategic marketing David Shelton says: “Now we have had time to look at the paper and to take a considered view, I still think it looks pretty confused. I am very concerned what we will end up with is something that, while created for the very best intentions, will be in the end expensive and complicated.”

One thing that seems to have subsided since January 14 is the kneejerk reaction which led many to conclude immediately that the IFA sector would disappear.

A realisation has come about that a defined-payment system does not mean independent advisers actually have to charge fees, although the reaction of many consumers may still be they are being asked to pay up front when they have not been in the past.

LIA director of public affairs John Ellis says: “The package needs to be repackaged. The move towards taking the commission option away does not make sense. It only forces IFAs into another group.”

The growing acceptance of the authorised financial adviser tier, which appears to allow IFAs to continue to operate their businesses in the same manner, still remunerated by commission, as long as they drop independent from their name, appears to have gone some way to alleviate fears.

Buchanan says: “IFAs are likely feeling a lot more settled than they were at the outset, when things may have looked pretty bleak.”

The perception does still exist that the FSA is determined to push through its reforms, although there is a sense that perhaps the regulator is more willing to listen than it was upon publication of CP121.

At the time, it appeared that the FSA&#39s head of the polarisation review David Severn was very committed to his plans and that it would take nothing less than a miracle to change his mind. But in a recent interview he was singing quite a different tune, saying if anyone could point out gaps in the plans he would be interested to hear from them.

Holden Meehan director Amanda Davidson says: “It has probably dawned on the FSA there is a lot more to do than they first imagined. The broad architecture is going to happen. We are not at the foundation level, we are building the house – they have already laid the foundation.”

Questions still remain over the validity of the FSA&#39s research, which it has used to justify its course of action.

The outcome it reached that consumers are willing to pay fees seems to directly contradict the findings from a much bigger survey by Swiss Re two years ago.

That there is commission bias at work amongst IFAs is questionable at best. The evidence used about the two product areas, distribution and with-profits bonds, does not consider the trend of rebating commission.

Claims that there is no or very little commission rebating in existence were backed up by sales of regular premium personal pensions, on which the annual charge is usually around the 1 per cent mark, which does not leave a lot of room for rebating.

Informed Choice managing director Nick Bamford says: “If you look at CP121 and what it is trying to achieve, I do not agree with any of it. The only bit of it that has any validity is the discussion about adviser training and having two tiers of advice. The rest of it is not supported by the evidence.”

Ellis says: “I think the evidence looks very artificial. Why shift everything around like it is trying to? It runs the danger of damaging consumer interest.”

The state of play as the process continues is one of an industry unconvinced by the motives of a regulator proposing wholesale reform of the way the market operates.

Aifa director general Paul Smee says: “I remain of the view that things would have been better if this paper had been different. But the paper is out and the way to affect change is to address the detail of the document.”


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