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The sting in the tail

At the risk of becoming a bore, (or even more of one, as a few anonymous fans have suggested), I again find fault with our lords and masters at Canary Wharf.

They were everybody’s favourite whipping boy in 2009 and this year looks like being no different. On this occasion, my ire has been raised by CP09/31, a moniker more pertinently applied to a Star Wars robot.

This is the December 2009 Delivering the RDR publication that focused on qualifications, corporate pensions and protection.

Initial press headlines welcomed the news that protection would not be dragged howling and screaming into the world of adviser-charging.

ell, this is not quite true. Hidden at the back, neatly positioned among the tailend verbiage and disguised as a paragraph on conduct of business rules, you will find section 4.36.

Sounds dull, doesn’t it? It’s not Shakespeare, it’s not Grisham, in fact, it’s not even Jeffrey Archer, which is perhaps no bad thing. The point is that this nasty little paragraph nestles at the back camouflaged as some boring bookend to a pretty desultory read. For your gratification, I repeat it below:

“Many respondents commented on the difficulties caused by having two different regimes for investment and pure protection products, since so many of them are sold by the same firms. Firms should note that the option remains to elect to sell pure protection products under Cobs, if firms feel that the complexity of operating two different compliance regimes would impose too much cost on their business. If we implement the proposed RDR rule changes as drafted in CP09/18, advisers electing to sell under Cobs will be required to apply all the new Cobs rules to their pure protection advice, including those on adviser-charging.”

Let us imagine the scene. A client approaches an adviser to discuss a protection plan and a unit trust Isa. The adviser can elect to deal with these under the two rulebooks Cobs and Icobs. Each has different requirements and, under Icobs, the adviser can continue to receive commission from the provider.

However, this set-up is designed to engender fear into any right-minded consumer who does not welcome a disc-ourse on rules and processes or a carrier bag full of paperwork. Do not forget that reducing consumer confusion was one of the boasts of the RDR enthusiasts and, let’s be clear, this will achieve nothing of the sort.

Now, here is the sting in the tail. If the adviser quite sensibly decides to deal with both matters under the Cobs rules, thereby reducing the scope for consumer puzzlement, he must also apply adviser-charging to the protection plan.

Is this adviser-charging on protection through the back door? Is it the product of a confused mind, from some person or committee that fails utterly to understand the mechanics of retail advising? Wake up FSA, wake up from this nightmare vision of a financial utopia because, let me tell you, it will not work and will not serve the consumers that you purport to protect from those 33,000 dangerous financial advisers.

Alan Lakey is director of Adviser Alliance and partner at Highclere Financial Services

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