Our message to politicians, regulators, consumer interest groups and the wider population has been unambiguous. In difficult times, it is more important than ever that consumers should receive good financial advice.
In my view, the retail distribution review interim report represents the biggest ever regulatory endorsement of independent advice. The evidence we presented to the FSA in support of true independent advice consisted of the views of members’ clients and other real consumers – not consumer interest bodies – and their experiences and opinions of advice are difficult to gainsay.
Aifa’s response to the RDR caused the FSA to turn many of its original proposals right round. Reading the industry press, however, it is clear that this is much to the chagrin of those whose priority is to sell products.
If the savings gap is to be closed, I am sure members agree that more financial products need to be sold and that a discrete, ethical sales channel is needed. Aifa’s call, in response to the RDR, was just to ensure that consumers can be clear when they are receiving advice and when they are being sold a product.
I am delighted that we convinced the FSA of the importance of this distinction. It is now up to the relevant stakeholders to present the FSA with tangible models for non-advised sales businesses.
Digressing from the RDR but staying with the issue of advice, one of the benefits of working in tandem with sister organisations, as Aifa can often do with the Association of Mortgage Intermediaries and Association of Finance Brokers, is that where universal values and overriding principles are shared, such as the value of independent advice, the lobbying “whole” is often greater than the sum of the parts.
The AMI’s latest research project, The Value of Mortgage Advice, bears out the message that the benefit consumers gain by taking professional advice is remarkable.
It was found that mortgage intermediaries can save consumers up to £1,800 a year compared with going direct. Most interestingly, eight out of 10 consumers chose to go to an intermediary for advice over all other drivers, including cost. The level of service was another key reason for using an intermediary. More than half of borrowers who arranged their mortgage through a broker thought they were kept informed of the progress of their application. Of those going direct, this drops to a third.
Such evidence can only serve to boost consumer confidence in advice, which the FSA has stated is high on its list of priorities.
None of the proposals in the RDR interim report is set in stone but our response has been taken heed of. We believe the extensive evidence put forward is robust enough to weather any storms between now and October when the consultation paper is published. We will continue to engage with the regulator and Government to ensure member views are represented. To help us do so, we have just reconvened our RDR working party consisting of the great and the good of the industry.
Supporting Aifa has ensured that your voice has not just been heard but listened to and acted on.
Chris Cummings is director general of Aifa