Steve Burgess

The content of stakeholder decision trees will be prescribed by the FSA, with product providers and financial advisers at liberty to personalise the presentation by using their own brand, amending the projection figures (to reflect an annual charge lower than 1per cent or a different retirement date) or changing the format.

However, decision trees cannot be used as marketing tools or as a means of gaining competitive advantage. This seems reasonable but where I start to have a problem is with the requirement that decision trees must be incorporated into all pre-sales communication with the customer.

This includes key features documents, category-C mail-

ing packs and web pages, which will surely now become unbearably cumbersome items with the consequent take-up of the product.

Moreover, when a customer is contacted remotely, for example, over the phone (which is likely to increase in frequency, it being quite an efficient way of selling low-margin products), the customer must have a decision tree in front of him. Again, this creates a further cog in the process, with decision trees having to be posted or faxed prior to a call.

Maybe you could get round this if every household in

the UK had their own pack of decision trees. Perhaps they could be kept in the magazine rack along with the Radio Times, printed on the back of cereal packets or flashed

up subliminally during Coronation Street until everyone

memorises them.

If you add to this that, where the employment status is unknown (not unlikely in many cases), all the decision trees must be issued, then you can see how unattractive the prospect must be of wading through pages of information, even for the most determined of customers.

Finally, to add insult to injury, the FSA will not be providing a decision tree for contracting out. It will be up to providers and advisers to develop their own procedures for this. Well, thanks a lot, FSA.

My second point of contention concerns the proposal that, where a stakeholder plan is not recommended but an alternative such as a personal pension is, then the provider/

adviser must issue a “reason why not stakeholder” letter.

Clearly, this stems from the assumption that a stakeholder will be the best option for the vast majority of people.

The letter must be issued to members of group personal

pensions and free-standing AVCs, as well as individual

personal pensions.

It certainly could have profound implications for the future of these products, especially when you consider the lack of margin in all pensions in the stakeholder era and the extra burden this could place on the sale on non-stakeholder pensions. There are a couple of reasons why this would be undesirable. As things currently stand, proposed regulations will make providing a with-profits option in stakeholder impossible for most providers, leaving personal pensions as a viable alternative for this popular fund. Also, for a GPP to exempt an employer from the requirement to provide a stakeholder, there must be an employer contribution of at least 3 per cent of earnings – clearly better for the employee than a non-contributory stakeholder.

Now, I know the proposal does not rule out any of these circumstances from being valid reasons for a “reason why not stakeholder” letter but I am suspicious of the agenda here. The FSA is suggesting stakeholder should have such an unassailable status that it must be specifically deselected as an option when advisers are recommending other products for very valid reasons.