Standard Life warns over restricted panel payments

Standard Life has raised concerns about providers making payments to be part of a restricted advice arrangement and called for greater transparency.

Money Marketing revealed earlier this month that providers are paying significant amounts of money to distributors as part of long-term distribution deals ahead of the RDR. One document seen by Money Marking discusses a £2m payment over five years from Aegon to Caerus Capital Group for “sales and marketing activity to support our partnership”.

At a Marketforce conference on the future of financial services distribution in London today, one delegate raised the issue about whether such payments between providers and distributors should be looked at by the FSA.

The delegate said: “One of the things I have already heard and seen some documents on is product providers, be it asset managers or life companies, being asked to make financial payments to distributors in order to be selected for a potential restricted advice model. There is a potential great risk in that in terms of the trust we are trying to restore.

“There is a big challenge over whether this is a commercial matter between the two parties or whether we should have some regulation around this whole subject area. I see some big potential issues coming down the line on these arrangements and the pressures distributors are putting on suppliers.”

Standard Life UK chief executive Paul Matthews responded by saying restricted advice is supposed to be about allowing advisers to limit the firms they deal with in order to achieve a more simple and quick advice process. He said the selection process should be“100 per cent transparent”, and should not be based on commercial arrangements.

Matthews said: “I do not see any problem with somebody saying ‘I am a financial adviser, I use these five companies’, but it destroys the whole principle and concept if to get on that list it is a question of how much money you pay. Then you get into an issue where the biggest firms just pay more money to get on the panels.

“If it is not based on the quality of the proposition and just based on a pure commercial arrangement then the customer should be told ‘I use these five companies because they pay me more than anybody else’ and not ‘I have chosen these five companies because they are the best proposition’.”

He added: “We should not start off with trying to find ways around regulation before it has even started. That would be a disaster.”