The fulcrum of regulation is advice. If you sell without it, you dramatically reduce your compliance responsibilities and process and, thus, the cost and risk in your business. In return, the customer greatly increases their responsibilities and reduces their likely help from the ombudsman if things go wrong.
Surely the most crucial aspect a seller must get their customer to understand is whether or not they give advice and why that is important. Anything else cannot be treating customers fairly.
Look at the growing number of sellers who say they do not give advice and you see an array of confusing signals and behaviour. Whether this is intentionally or incompetently created, it is self-evidently there to reassure and convince – to sell without taking responsibility for it.
Some examples are needed as non-advisers have got the initial disclosure document bit sorted out as process is their key skill. It is after they say they do not give advice that TCF principles are simply mocked. One big insurer’s retail arm calls those who cannot give advice (you guessed it) “your adviser”. Another major retailer says it cannot give advice and then confirms that you are best served by tax-deductible life cover. Others explain wrongly how payment protection insurance is the same as income protection and how life insurance cannot be taken out past 70. Another promises on its state-of-the-art website: “Life insurance designed around you” even though that is just what it cannot be.
The reason for all this disingenuousness is that most customers have some questions and telling them (as a non-adviser surely should) to go and read up some more or to take advice would ruin the sales figures.
All these convenient errors arise from our industry’s oldest failing – letting the marketing get ahead of TCF.
One reason why non-advising sellers feel they can treat regulation in this cavalier way is that the FSA handbook is itself far from definitive on this key issue. It refers merely to where a salesperson offers “advice on the merits” of buying a particular product. It seems that only statements linking product features and benefits to an individual’s needs are considered to be advice.
So there is plenty of regulatory wriggle-room for the crafty. Simply adopt odd conversational mannerisms aimed at implying what is right rather than saying it and you are freed from all pain. Except that there is no confirmation that this is the ombudsman’s view, particularly in the case where the client has been talking to someone called an adviser.
The ombudsman has said: “Just because it says it is a non-advised sale does not mean it is not advice.” And Money Marketing recently reported that the ombudsman’s view is that as little as a nod in the wrong place or a “yes” over the phone at the wrong moment could constitute financial advice, regardless of what the paperwork says. So there is no wriggle-room there.
On the other hand, there is a long gap between the sale and potential customer complaint in protection and Icob regulation is just two years old, so it will be a long while before these meretricious sellers are brought to book by the ombudsman, with the resulting reputational damage to us all.
Principles-based regulation gives the FSA just the tool needed to deal with those who deny customers the ombudsman’s full protection by saying they do not give advice. They should be made to explain that and why it is important – and then to refrain from actually giving any form of advice. Does that seem a fair principle to you?
Tom Baigrie is joint managing director at Baigrie Davies