The financial services industry is divided on the Treasury's suggestion to create an “innovative” Catmarked healthcheck for financial advice.
The proposal, contained in the Treasury's consultation paper, Standards for Retail Financial Products, is seen by some industry experts as a radical and worrying progression from Cat-marking of products but the Consumers' Association not only supports the idea but also goes so far as to sug- gest how a free or low-cost advice service could work.
Adding weight to the CA plan of action is the FSA consumer panel. Chairman Colin Brown says people should be able to get an amount of free accredited financial advice as a starting point. He says an examination of how this would be resourced is needed and suggests state funding as one solution.
Brown says: “I am glad this suggestion has been made as a discussion on access to financial advice is long overdue. The majority of people are not getting advice from the current mechanisms.”
The financial services consumer panel is urging the Treasury to progress with caution. The ABI is also warning the Treasury to tread carefully. It fears customers will take Catmarks to indicate that some products are intrinsically more suitable than others.
The Treasury says the idea for the new generic advice service is in its very early stages and it is waiting for feedback to its paper before moving any further with it. But it also says the proposed service, involving an adviser identifying generic products suitable for a customer's needs, would fill the need for financial advice not linked to products.
Virgin Direct has entered the debate, saying it is fully behind the Catmarking of products but does not support the standard being applied to advice. Instead, it wants the concept of tree-walking developed further.
Head of corporate affairs Martin Campbell says: “Decision trees have not been taken to the level they should have been and their scope should be broadened.”
Virgin Direct believes decision trees should be computer-based and consumers should either be led through them by advisers on the phone or complete the process themselves online.
The company envisages call-centre advisers not necessarily FPC-qualified but supported by qualified staff to take consumers through the advice process.
IFA-focused life offices again take a different line. Scottish Life head of communications Alasdair Buchanan says: “The C in Cat is for cost but in the context of advice it is difficult to understand what that means.”
Scottish Equitable says the viability of separat- ing advice from the sales process would have to be assessed carefully as there are a number of hurdles to be overcome.
The CA's other key suggestion is that a new type of financial adviser should be created to deliver the generic financial advice healthcheck service. This is already provoking serious concern among the IFA sector.
CA senior policy adviser Mick McAteer says: “We would like to float the idea of a new type of quality-marked financial adviser being approved by the Government and FSA to provide free, basic advice on commoditised products.”
LIA public affairs director John Ellis says: “It sounds like a recipe for chaos. I would be worried about the idea of a lower level of unqualified person.”
Aifa director of public affairs Tracy Mullins says: “We would look at the CA's proposition but it sounds a bit worrying. Advisers must be able to go one step further.”