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Should ABI kitemark be taken with pinch of Saltr?

The ABI&#39s Raising Standards quality mark scheme is the result of two years of activity by big hitters in the financial services industry.

The ABI had decided action was needed to raise consumer confidence in an industry burdened with a seemingly unshakeable image problem.

The only way forward was to raise standards to create an environment where more people would be more likely to make adequate financial provision for their futures and ultimately generate growth in the long-term savings market.

So how does this project, which is part of the Savings and Long Term Risk initiative, intend to do this?

Life office brands will have to stick to three main promises. These three promises aim to address three areas identified as key consumer concerns. These are clarity and comparability of information, appropriateness of products purchased and customer service.

Only when providers&#39 brands meet or go beyond every one of the expected standards across their prod-uct range, will they be all-owed to display the kitemark quality mark.

The project classes a brand as the name used by a company in its presentation to consumers and includes all sub-brands that the consumer associates with the main brand.

Such an example would be Scottish Equitable and Scottish Equitable International, which are classified as the same brand despite operating as separate entities.

A new independent body set up under the project, the Pensions Protection and Investments Accreditation Board, will grant providers the right to use the quality mark and is hea- ded up by individuals from outside the industry.

The Raising Standards project says it aims to complement regulation but also go beyond the standards which the FSA is establishing.

The quality mark will cover any product which is bought by individuals to meet long- term savings and protection needs. This covers individual life and pension products, as well as unit trusts and Isas.

Independent advice does not come under the Raising Standards remit.

The brands will be expected to keep to the three promises. They will also be expected to offer a 30-day cooling-off period, allowing consumers to receive their money back – less any fall in investment value during that time – if they do not want the product anymore.

Other key standards require providers to send out yearly statements for investment products in a prescribed format.

Another extra cost providers will incur will be the requirement to undertake annual surveys on customer satisfaction and complaints using a PPIAB-approved methodology.

PPIAB chairman Sir Michael Bett says: “This ground-breaking initiative raises standards and offers real benefits to consumers. I am delighted so many of the UK&#39s major financial services brands have already committed to seek accreditation in due course. I hope as many brands as possible will apply.”

Many providers, as well as IFA representatives, have been quick to voice their support for the initiative.

Association of IFAs director-general Paul Smee says: “The initiative is about providing a better service to customers and growing the market for pension, protection and investment products.

“The standards have been developed to ensure they take full account of the views and business practices of IFAs and the council of Aifa firmly believes the initiative will benefit IFAs.”

Scottish Life group chief executive Brian Duffin says: “We fully support the principles which underpin the Raising Standards quality mark scheme. They provide the necessary framework for improving consumer confidence in our industry, which we believe is in everyone&#39s best interest. We intend to achieve the quality mark as soon as possible.”

On last week&#39s launch date, Money Marketing was given a list of 41 providers who had committed to seeking acc-reditation.

While 78 per cent of the market is on paper wholly committed, there were some significant omissions, including Legal & General and Tunbridge Wells Equitable Friendly Society.

In addition, Virgin issued a statement shortly after the launch entitled: Take with a pinch of Saltr.

The statement argued that the new standards are not high enough, falling well shor
t of the Government&#39s established Catmarking of mortgages and Isas, plus the benchmarking function of stakeholder.

It also suggested perhaps the best hope for Saltr is it “will act as a house-cleaning exercise for the financial old guard – forcing them to finally stop the worst practices and slowly start to catch up with the best in the industry”.

The costs of the upkeep of the accreditation are estimated at £300,000 but, behind closed doors, many life offices fear the costs of meeting PPIAB exacting standards will easily exceed seven figures.

A brave few are openly reticent about signing up to Raising Standards.

Twefs chief executive David White says: “It would be foolish to sign up to this without being satisfied this is the best use of our members&#39 money. There is an awful lot more work to be done on this before we decide.”

Any initiative which has the aim of raising standards across the industry should be instinctively embraced by providers.

It is especially pressing for an industry which is batt-ling with an ongoing stigma brought about by the pension misselling review and the ongoing negative endowment headlines – not to mention a potentially looming with-profits or income drawdown scandal.

But in a time when providers are already being kicked into shape by stakeholder and Catmarking, a potentially competing regime, which adds yet another layer of cost in a margin-squeezed environment, means life offices will need to be absolutely sure it is worth it before joining the herd.

Another slow period for unit trusts sees the average return for one year fall to 10.07 per cent from 13.46 per cent two weeks ago. The average return on insurance funds is also down by almost 2 per cent to 5.38 per cent.

A bad month for Scottish Equitable&#39s European smaller companies fund saw it drop from second to third in the top unit-trust rankings. Its yearly performance has fallen to 141.5 per cent for the year to October 16 from 173.62 per cent.

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