Consultant Towers Watson has criticised the FSA’s “unbalanced” approach to with-profits funds, arguing that the regulator’s consultation overlooks the interests of shareholders and members.
The FSA published the consultation, titled ‘Protecting with-profits policyholders’, in February this year.
Outlining its response to the paper, Towers Watson says the regulator’s focus on the welfare of policyholders should be “balanced” against the interests of other stakeholders.
Director Richard Waller says: “We think it is important that the FSA is clear regarding the application of rules and guidance where it conflicts with existing principles or practices of financial management.
“Firms have different ways of managing their funds and the proposals, as issued, risk overlooking arrangements that, in a lot of circumstances, are working very well for all parties.”
The consultant also says the FSA’s approach to fees charged to with-profits funds by other companies, such as investment managers and service companies, is a “cause for concern”.
Waller says: “As drafted, the proposals seem to prohibit these organisations from including reasonable loadings of risk, uncertainty and profit.
“Where the group company is assuming risks on behalf of the fund it should be allowed to charge a commercial price, as would be the case if the services were provided on the same basis by a third party.”