The FSA’s latest RDR consultation paper contained welcome new thinking, although some concerns persist.
The regulator has shown it is willing to listen to the industry in its relaxation of the definition of alternative assessments. Plans for oral assessments were always going to be unworkable and it is wrong to suggest that written examinations are the only way to evaluate professional standards.
Allowing such assessment methods to be used on an ongoing basis, rather than just as a transitional arrangement until 2012, is also a sensible move and will hopefully encourage more awarding bodies to offer work-based assessments. Awarding bodies, in conjunction with the qualifications regulator, need to be quick to set out any alternative assessments they plan to offer.
The FSA’s decision not to extend adviser-charging to protection is also correct. The consultation paper shows the regulator has taken on board the howls of criticism that greeted the regulator’s previous paper which suggested a possible read-across.
Turning to the group market, it was always likely that the FSA’s views on adviser-charging would be replicated in this area. From 2012, commission on group pensions will be outlawed and replaced by consultancy charging agreed between the employer and adviser.
The big concern is the FSA has decided to also read-across its unpopular ban on provider factoring to the group market. This has the potential to severely limit the levels of advice available to individuals in group schemes.
As per the individual market, the FSA argues that allowing factoring could lead to provider bias being retained in the system. It also believes that a standardised factoring arrangement would fall foul of competition law.
Surely there is an argument that allowing standardised factoring could be a means of promoting, rather than hindering competition? The FSA should be prepared to have this argument with the Office of Fair Trading or provide more evidence to support its belief that standardised factoring would be unlawful.
The FSA appears pretty blasé about potential damage to existing provision in its suggestion that any reduction in take-up will be countered by the introduction of personal accounts and auto-enrolment into qualifying group schemes.
In its quest to bring greater transparency to group pensions the FSA risks damaging, rather than encouraging, an important part of the regular savings market.