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Should the regulator separate advice, intermediation and distribution?

The Insurance Mediation Directive is currently looking at advice, intermediation and distribution as three separate activities, giving greater clarity to the different roles within the industry, according to Aifa’s Chris Cummings.

Cummings, who has been representing UK IFAs in Brussels this week, says if the UK had the same clarity in the RDR a clear separation of advice from sales would have been more achievable.

In his blog, he says: “The Commission may well drive through the changes that FSA seems resistant to do.”

Do you think advice, intermediation and distribution should be looked at in isolation?

Now that the RDR is nearing the final stages of consultation, do you want to see a clear split between advice and sales, or is the restricted advice label a good compromise?

Do you think the EU are likely to introduce wide-reaching changes to the intermediary market mid- or post-RDR?

Post your comments below.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Separation of advice
    I firmly believe there should be a distinction between manufacturers (product providers and fund managers) and distributors (IFAs) and is something I have advocated previously and in particular in my response to RDR. We can then work towards a system where advice would be part funded by the State so that those unable to afford fees could obtain quality advice without fear and bias, and those wishing to obtain advice privately for more sophisticated situiations can do so. Removing the manufacturers from the advice process has to be the ultimate aim (the recent FOS figures on complaints highlights this irrespective of the slant the ABI is putting on the situation) . This will also make any future regulation of the industry easier. Any development along these lines is to be welcomed.

  2. advice or sales?
    I am and remain convinced that the FSA has ‘blurred ‘ rather than provided clarity to the consumer between sales and advice. Someone at ABC Bank is called an adviser, but they don’t advise they ‘sell’ the banks products. An IFA or mortgage broker will offer advice, becuase they are not tied to just one product, but of course the FSA continues to provide confusion here by the mis use of the word independent, which means something different to what is in the Dictionary and generally understood by the consumer. Chris of course has put his finger on it with regard to the current situation on the RDR and maybe, just maybe the FSA may listen (but do not hold your breath)

  3. Should the regulator separate advice, intermediation and distribution?
    Of course ~ the problem with the RDR is that it focusses principally on distribution (of products). Apart from requiring advisers to study for exams on all sorts of subject areas completely outside their day to day activities (which is what makes the textbooks such dreadfully hard going), the RDR says virtually nothing about the advice process (other than the FSA’s view of how we should be paid for the implementation and ongoing servicing of products). Providers and the banks flog product ~ they don’t give advice, other than tailoring their product recommendation letters to look as though they are. Financial planning advice from a bank is a contradiction in terms. The crucial yet (within the RDR) crucially overlooked aspect of what IFA’s do is that we provide advice on all the products that our clients may already have. The product recommendation, should one be made, comes after all that. That service is what distinguishes the IFA from just about any other channel of product distribution. So yes, advice, intermediation and distribution are three very different things and should indeed be treated separately. But is the FSA inclined to appreciate the distinction? Oh, how we wish.

  4. insurance mediation Directive
    We are in danger of becoming too prescriptive. I maintain that as long as clients are made fully aware of what they are paying and for what, I dont see the need for further regulations, limits and splitting things further. Uk clients are still trying to understand all the changes that have been hoisted upon them over the past 5 years. I see no reason why, if an IFA wants to offer it, they cant break these things down under the existing regime as long as it is fully explained. Why do we all have to do the same thing? Clients are all different and require a variety of ways to pay that suits their situation and pocket. Smaller clients, for instance, who may only wish to invest very small amounts or a regular monthly amount are given little choice now, but to go to a bank and get tied advice, paying maximum initial commissions for ever more, on say ISA contributions, since the cost of going to an IFA, is now completely uneconomic, since the commision is insufficient and a fee is proportionately unacceptable. If you compare what an IFA now gets for recommending and setting up an ISA, it does not even cover the costs. In the past, cross subsidies from other products sold enabled IFA’s to provide this valuable service, but now this is not possible. I am sure that the purists out there would say it was an unfair way of working, but at least it provided access to independant advice for everyone, and not just the wealthy.

  5. advice despite the FSA not because of it
    I doubt that the EU will see the issue with the same eyes as the FSA. Two reasons for this a) in the EU most countries distribute via tied agents. In Spain in particular you see offices in towns with AXA logos or some such over them. Santander officials I seem to remember, expressed surprise that we as IFA’s provided such a large client base to them compared to tied agents. So I doubt the EU will as bothered as the FSA is about the role of an intermediary and how they get paid. And the second reason b) is that the FSA is staffed by Civil Service types who would not know one end of a reasonably complex financial plan from the other, and is more keen on simplifying its role by shoving who it regulates into neat little boxes it CAN tick rather than bother understand. As such we have a regulator that fails in its main objective of protecting the consumer but is very good at protecting the likes of Equitable Life, the Banks and its own backside by trying to rid the country of the very people that the FOS data proves to be doing a pretty good job despite the FSA’s Kafkaesque interference, manipulation and dictatorial stance.

  6. semantics
    Whats in a name? well very little if you ask the FSA. RDR is suposed to be about clarification, and this is very important when considering distribution of financial products. The ‘bad old days’ when advisers were classified as either ‘tied’ or ‘independent’ gave an individual a clear sense of the person they were dealing with. Since that time it has gone downhill as the line has been blurred. Words are important, as newspaper headline writers can testify to. You would not be bothered by a STOCKMARKET DROP but a STOCKMARKET CRASH is altogether different. We need a dramatic and clear difference in the discription between the serivce provided by the disribution chanels, I suggest ‘Personalised financial advice service’ and ‘Pressure selling conglomerate’. Sounds about right.

  7. Yes
    Simpe answer YES.
    Longer answer I agree with otehr commentators below (except anon sorry) but do see anons point of view about so many changes and the argument for letting the client choose. I think break it down in to advice, intermediation and distribution is the way forward, but nothing wrong with anon rebundelling it when explaining to clients if that suits your model/client. Having the transparancy and being ABLE to explain it is what is required, but if the client will not understand or is not interested in the explanation, my answer is don’t……. If they do/will, you should.

  8. Time and money –
    The FSA have wasted much time, money (our money) and caused utter confusion all to no avail as they are going to have to implement what the EU says at the end of the day anyhow. CV is correct there hardly any IFA’s in mainland Europe and that is another conformity that is going to happen here soon.

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