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Industry turns on FSA for backing filtered questions

The FSA has been resoundingly criticised by IFAs and providers for

suggesting that the way forward for regulating sales of the Sandler suite

of products is an extension of a decision tree or filter question approach.

They claim the regulator has failed to learn any lessons from using the

same techniques for stakeholder pensions, which have been branded a failure.

Decision trees have rarely been employed for stakeholder pensions and IFAs

and providers doubt that they will work for the new products.

Discussion paper 19, Opt-ions for Regulating the Sale of Simplified

Investment Products, published by the regulator last week, outlines three

possible regimes for the new Sandler-style products.

The first, “self-help”, would be execution-only business with product

suitability warnings attached while the third, “focused advice”, would come

closest to advice as it currently exists and is supported by Aifa.

Clearly favoured by the FSA, however, is the second, “guided self-help,”

which includes filter questions administered by a low-level adviser with no

further advice given.

FSA director of conduct of business standards Michael Folger says: “Of the

three options, regulation of the sales process based on filter questions to

screen out consumers at clear risk of buying unsuitable products looks

quite promising.”

Aifa director general Paul Smee says: “What is going to mark this out from

the route that has been tried in the past and failed? They have not said

how this is new and improved.”

Syndaxi Financial Planning principle Robert Reid says: “They say they want

filter questions but they also say they do not want too many – this makes

it something of a challenge.”

ABI head of life insurance Francis McGee says: “The FSA certainly needs to

learn some lessons from what they have created with stakeholder pension

decision trees.”

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