Designation-only stakeholder advice is falling into a regulatory black hole with no regulator overseeing the sales process, leaving advisers confused over what constitutes compliant sales.
Because designating stakeholder schemes entails a sales process involving two businesses, the selling of the schemes is outside the FSA's remit as it views them as professional relationships. Such schemes also fall outside the remit of Opra, leaving the sales process effectively unpoliced.
This regulatory vacuum is leaving IFAs confused over how to ensure they are advising on designation-only business without fear of redress in the future.
According to some IFAs, any advice given to an employer regarding a designation-only stakeholder requires full compliance documentation, including a corporate fact-find, terms of business signed by the appropriate company director and a corporate reasons why letter.
But there is concern some IFAs might underplay the amount of work required to securely execute designation-only business, motivated by low margins to do the bare minimum.
Temple Bar Independent Financial Advice senior partner Simon Mansell says: “The danger is that designations are being hoovered up without full compliance procedures and documentation taking place.”
FSA spokeswoman Jackie Blyth says: “We do not regulate this area because it is a business-to-business relationship. Once the employer signs up, they have to meet Opra requirements. Our rules concern employees once the employer has signed up.
“Business-to-business relationships have never been regulated as they are professional relationships.”