View more on these topics

Open up the closed books

The present FSA review of Treating Customers Fairly provides the regulator with a golden opportunity to enhance significantly the quality of service for financial consumers.

Technologies now widely adopted in other industries make it viable to deliver high levels of information to investors quickly and at low cost.

The FSA must take bold and visionary steps so consumers can recognise the financial product providers that are dealing with customers in an open and honest fashion.

Sadly, from an examination of the recently published Progress and Next Steps document, I fear that this chance may be wasted.

For all the ritual flagell-ation that the financial services industry suffers at the hands of the Government, the Treasury select committee and the media, many people are doing a great deal to address the problems of the past.

An excellent example of this is the increasing move towards the use of scientific asset allocation-based models when effecting and reviewing clients&#39 investments.

Advisers are recognising that it is far more important to get the underlying sector allocation for the future right rather than seeking out star fund managers or chase past achievements using historical performance tables.

The FSA itself has championed much of the move away from reliance on past performance but it needs to recognise that if you remove one measure of selecting financial products, it is important to have others available.

Systems are emerging to enable advisers to diagnose a client&#39s attitude to risk and find the right mix of investments to match the risk profile. But there needs to be easy access to information on the underlying investments in any contract. Transparency becomes essential for the adviser to carry out their task.

Some life offices are using the Origo contract enquiry standards to make valuations on clients&#39 holdings available electronically. Fund managers are taking similar steps through EMX Co and fund supermarkets.

This is valuable but we should recognise that the move towards asset allocation-based advice means that the current message sets should probably be significantly extended.

Cash values and unit holdings are typically included but information is not normally provided on the underlying assets within the investments. This information can be accessed from a number of subscription-based services but it must surely be better if it could be included in the message from the product provider.

The main problem for advisers is not in getting information on investments still open for new business but getting information from closed offices, closed funds and providers which never operated via IFAs.

Over £160bn worth of investments are held in funds where it can be argued there is no incentive for the provider to deliver good investment performance and investors are locked in by, in some cases, Draconian exit penalties.It is surprising that this has not yet become more of a national scandal.

It should be recognised that it is not just with-profits endowment policyholders who are affected by this. How many million personal pension plans were sold by offices which are no longer open for business?

It would be unfair to suggest that all closed offices are simply seeking to milk the cash cow of locked-in customers by minimising the time spent on delivering investment returns and information to policyholders.

I am sure that some of the companies are seeking to achieve a better return for their customers by operating businesses which are devoid of the strain of new business acquisition.

Those companies which are looking after the clients&#39 best interests should become more open and transparent with their cust- omers. If they will not, should a prudent regulator lay down minimum requirements for delivering information to customers?

There are significant economies that can be achieved by closed offices in using electronic messaging to deliver details to professional advisers.

If the FSA does not want to mandate detailed levels of service and transparency, why not identify a minimum level that would be acceptable and, beyond that, define further levels that could represent both good and optimal levels of service?

Product providers could be required to make clear the level they are delivering by using a simple traffic light system similar to that being adopted with endowment review letters.

If a provider is only offering the minimum level required by the regulator, the customer information status could be flagged as red, a good level of information could be shown as amber and those that make the effort to provide an optimal level of service would have a green status.

If colour-coding is too emotive, why not a star system with different levels of client information enabling providers to identify their customer information services as meeting certain predefined levels of service.

If the measures were made public, product providers could be required to rate themselves against these standards and justify the status they allocate as part of their electronic reporting.

Such an approach would provide a measure against which consumers could compare the services of different providers. It could provide closed offices and funds with a mechanism to demonstrate that they remain a good home for policyholders&#39 savings.

It would encourage all providers to deliver a higher level of detail that would enable advisers to give higher-quality advice.

I believe that such transparency would be in interests of the regulator, the ind- ustry, Government and consumers and could be a step to restoring public confidence in the savings market.


NU axes EPP cash as end looms for executive plans

Norwich Union is axing initial commission on its executive pension plan from this week in response to pension simplification. It is removing Lautro initial commission on the EPP from August 16 ahead of the distinction between executive and personal pensions disappearing. The company is making changes are being made to specific product types which likely […]

GMAC-RFC aims to lead with new self-cert range

GMAC-RFC is aiming to become the market leader in self-certification mortgages with a new range of products. It says it is extending its range while other lenders are withdrawing or making their products less competitive. HBOS subsidiary The Mortgage Business, which has been a significant player in the self-cert market, recently closed to new business. […]

Alpha to Omega&#39s Rowe quits after boardroom bust-up

The founder of Alpha to Omega has left the network after less than two years as a director of the company after boardroom disagreements over business strategy. Founder Terence Rowe left the firm after he suppor-ted a plan to buy out Alpha to Omega&#39s majority shareholder. His plan was not backed by chief executive Stewart […]

Focus works with Mortgages Plc

Management solutions provider Focus Solutions is working with specialist lender Mortgages plc, on improvements to its internet service for intermediaries.Intermediaries dealing with Mortgages plc will now be able to complete an online Decision in Principle (DIP), Key Facts Illustration (KFI) and Mortgage Application. Case and Commission tracking will be added as part of an ongoing […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm