View more on these topics

Royal London: FCA must protect consumers from vertically integrated firms

Loney-Phil-Royal London-2013

Royal London is warning the FCA needs to scrutinise the growing number of providers who also own advice firms.

Chief executive Phil Loney says consumers are in danger of losing out from the “return of the direct sales model”.

Standard Life’s new adviser consolidator 1825 has snapped up several independent advisers over the past few months.

Loney says: “If you look at the data then this kind of controlled advice sector is growing really fast. That’s a real concern, I’m hoping when Andrew Bailey comes in to the FCA this sort of model – which is based on reducing competition in the market – looks at it. I doubt it is really in the interests of the consumer.”

He adds: “I understand how that works for firms like Standard Life, but I’m not sure how it works for the market. An impartial adviser makes a recommendation and finds you best products in the market. Advisers owned by providers will do the first of those things, but not the second, because they are working off a very restricted panel.”

Loney says the regulator needs to step in to protect consumers from fundamental conflicts of interest.

He says: “You can bet your bottom dollar Standard Life products will be on those panels. It raises a real conflict of interest issue and our concern is this looks an awful lot like a return of the direct sales model. I’d like the regulator get hold of this and call it something different, like partial advice.

“Over time, shareholders are going to want more margin – so is advice going to get more expensive? There are cost benefits from vertically integrating but my worry is they will flow to shareholders and consumers will find they get a less than wholesome service at an increasing price.”

Recommended

Axa-Logo-500x320.jpg

Royal London pulls out of bid for Axa protection arm

Royal London has pulled out of a bid for Axa Wealth’s protection business SunLife, Money Marketing can reveal. In February the mutual entered second round talks to buy the over-50s cover business from the insurer – which is splitting up its UK life operations – but it is understood the firm has walked away from […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Do i detect a touch of Sour Grapes here? Could this be something to do with being removed from a huge vertically integrated network’s restricted panel a few weeks ago perchance? Not that Royal London is even remotely competitive for anything but their Governed range. What’s that? A vertically integrated firm that is owned by a parent insurer, who typically offer a whacking great discount to the end consumer for using that parent insurer – of course that is AWFUL news for end consumers – who would possibly want their adviser to recommend a product from their ultimate owner, if he was able to offer a sizeable discount specifically BECAUSE he was owned by that parent group??? What RL are saying is that vertically integrated restricted networks are costing them money because nobody is buying their clunky, old, expensive products any more and they are going to sulk – if you want to compete, then innovate or reduce your costs. A conflict of interest is only of any importance if consumers are detrimented – this is the complete opposite.

  2. Why would the cost of advice be less just because the ‘adviser’ is part of the distribution model unless they are offering a reduced level of service (i.e. perhaps tied).

    My experience of St James Place is that their costs are significantly higher despite this structure….. in part to meet the cost of the ‘commission’ paid to those advising on SJP products. I’m also led to believe they have exit penalties on new contracts.

    There is also a significant danger that clients think they are getting advice which is more impartial that it really is. Recent history suggests that tied or heavily restircted advisers can’t operate in the RDR world and therefore a real concern is that the advice it dressed up as something it isn’t.

    The ongoing issue between the clear disclosure between independent advice and everything else continues.

Leave a comment