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Principle buoys take centre stage

FSA chairman Sir Callum McCarthy’s landmark Gleneagles speech brought to surface the regulator’s deep concerns about the current distribution model.

Following industry consultant Ned Cazalet’s report highlighting what he saw as the broken business model of UK financial services, McCarthy’s deliberately provocative words posed stark questions about product and provider bias, churn and future profitability.

The speech was followed by an autumn address from managing director Clive Briault detailing further the scope of the FSA’s retail distribution review, which will present an initial paper next summer.

The five themes are sustainability of the distribution sector, the impact of incentives, professionalism and reputation, consumer access and regulatory barriers. Each theme involves a committee of industry faces, including all the major trade bodies and some adviser names, such as Thinc Destini’s Roderic Rennison.

The move to principles was another big theme as the FSA set out what it expects from advisers and began consultation for the slashing of its rulebook and its interaction with Mifid. On the back of the Newcob consultation, the FSA sparked debate on the role of industry guidance in supplementing its high-level principles.

Some, like the Chartered Insurance Institute, see the proposals as a chance to cement its role as a professional body but others such as Aifa have no intention of being involved and worries have been expressed about potential confusion over the regime and its interaction with the Financial Ombudsman Service.

Aifa scored a victory in the summer when the Office of Fair Trading ruled that the market-average menu rates made advisers look unfairly expensive by including non-advised sales in the calculations. The FSA’s yearly recalculation of the averages took into account the OFT’s concerns but Aifa is still worried it is impossible to get accurate figures for collective investments due to the many ways in which commission is paid.

Concern about the effectiveness of the menu was another theme, with growing consensus from the trade bodies such as Aifa and Association of British Insurers – and, in fact, the FSA – that the menu is not working as required. There will be a post-implementation review in 2008 but, with growing acknowledgement that depolarisation has not been a success and dramatic suggestions expected from the retail distribution review, the regulatory environment could be looking at more major upheaval rather than simply tweaking.


Mixed messages

Scottish Widows marketing director for protection Nick Kirwan says the industry has been delivered a heavy blow over pension term assurance and with nobody knowing what is round the corner, the wrong messages are being sent out to customers.

Pru ponders £9bn orphan cash move

Prudential is understood to be in the process of recruiting a policyholder advocate to start the ball rolling on reattributing the inherited estate of its with-profits funds.It has been looking at ways of accessing the surplus cash from its with-profits fund for 10 years and is under pressure to free up its £9bn orphan assets, […]

NU cuts rates on lifetime loans

Norwich Union is reducing interest rates on its fixed-rate lifetime mortgage plans sold through intermediaries from 6.35 per cent to 6.3 per cent or 6.6 APR. All pipeline cases offered on or after December 18 will be subject to the new rates.

Ex-PosSol trio could launch rival

Three former Positive Solutions directors are setting up a rival company in the new year, Money Marketing understands.Former PosSol sales director Chris Smallwood, compliance director Chris Davies and IT director Mark Smith have joined forces to launch the Leeds-based operation.It is understood the model will aim to emulate PosSol’s success by operating a remote technology-based […]

Retirement - thumbnail

A downhill stroll?

The Department for Work and Pensions (DWP) has recently published new research, which once again demonstrates how the prospect of retirement is changing for older workers.


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