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Industry gets a clearer picture of Sandler&#39s vision for the future

The path of Ron Sandler&#39s review is becoming clearer in the aftermath of his recent speech to the Aifa annual dinner in which he claimed commission was just an opaque loan to the consumer and he emphasised the need to close the savings gap.

Sandler chose the dinner as the first public airing of the progress of his review of medium and long-term savings. This could be seen as walking into the lion&#39s den, considering the reaction provoked among IFAs with the publication of his sweeping consultation paper in July.

While his speech went some way to allaying industry fears by ruling out the commission cap, Sandler stoked other fears and created new worries with some of his views on commission bias, how the “stakeholder straitjacket” has worked to drive down commission levels and the need for more standardised products.

He also fuelled concerns that his review could push IFAs out of the market by reducing the need for advice on some products when he commented: “Our supervisory regime could simplify products with a correspondent reduction in the need of certain elements of advice.”

Aifa director general Paul Smee thinks that rather than standardising products, this may see Sandler recommend three categories of advice – generic, core and holistic – as a way of giving all parts of the population access to some form of advice. Smee says Sandler would do better to take this approach than extend Cat standards which have been shown not to work.

Many believe Sandler may pursue standardisation and transparency to encourage more people to save but they are not convinced that this will work. Warwick Butchart Associations IFA Len Warwick says: “More product regulation is not a way that I would like things to go as it does not encourage product innovation.”

Legal & General pensions strategy director Adrian Boulding says: “He is clearly a man that likes transparency and clarity and simplifying the range of products available could be his way of getting to people to increase savings. He may think standardisation and Cat standards will help simplification and make everything more run of the mill.”

Some believe his determination to increase transparency means with-profits policies will fall under his gaze. Boulding says: “He will obviously look at with-profits as part of his crusade for transparency. His review has no natural boundaries.”

Turning to Sandler&#39s view that consumers think advice is free because of commission which makes their “level of satisfaction almost inevitable” and his comment that it is an “opaque loan” from providers, the industry thinks his answer may be to increase disclosure.

But most IFAs thinks disclosure is working and making this a bigger regulatory burden would not solve the perceived problem. Berry Birch & Noble marketing director Stephen Ingledew says: “It is not true that consumers think advice is free. People are not that stupid and it is quite a derogatory point about the general public.”

DBS chairman Ken Davy warns against more disclosure saying the answer is to simplify it. He says: “The amount of documents facing a client now is overwhelming. Simpler disclosure would actually be more effective.”

Boulding says: “If he thinks commission is an opaque loan, I think he will want better disclosure of the effect of commission on the terms of the product. Commission discussions will become commonplace in adviser/client meetings and whether fees or commission suit that client and product purchase better.”

Warwick says: “From the way he was talking, he is keen on speeding the movement towards fee-based advice. But if he wants more distribution of products to the mass market, he has to realise the more regulation, the more cost is created.”

Sandler also made it clear that polarisation will not escape his wide-ranging remit, saying: “You can&#39t look at the issue of commission in isolation as it and the merits of polarisation or its possible reform need to be considered jointly.”

Smee is concerned at what Sandler may do to polarisation, saying: “He is not a great fan of polarisation. His comments on being in favour of letting market forces have their way may make him think polarisation is anti-free market forces.”

Smee hopes Sandler looks at the effect on the market of removing polarisation as it would not help achieve his goal of increasing the savings gap, saying: “If he changes polarisation too radically it will red-uce the savings ratio as everyone will be too busy making changes to advice.”

Davy supports Smee&#39s concern. He says: “We would all welcome further improvements, like again increasing transparency. But I do not see how any weakening of polarisation can be termed an imp-rovement and I am sure all IFAs hope he won&#39t weaken it.”

But Aegon UK director of corporate communications Laurie Edmans believes the timing of his review may prevent him making too many changes to polarisation.

He points out that its future may have been determined by the FSA review, whose discussion paper is set to be published in December.

By choosing an event specifically for IFAs to unveil some of the secrets of his review after, according to Aifa, declining other speaking opportunities, Sandler has made it clear he realises their importance in the marketplace.

While both IFAs and pro-viders believe he is a man who listens to their views, they are concerned how this will translate into action when his review is published. What is now even more certain is that little in financial services will remain untouched as Sandler himself said: “There are no no-go areas, nothing is off limits.”


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