BRITANNIC ASSET MANAGEMENT
Means test for free advice
Britannic Asset Management is calling on the Government to provide free financial advice to the public on a means-tested basis in its response to the Sandler review.
It believes controlling pricing structures through Cat-standard Isas and stakeholder is not the way to achieve the Government's aims of improving levels of savings.
BAM says it would be more meaningful for the Government to provide access to free financial advice on a means-tested basis. It believes this is a more effective use of taxpayers' money than initiatives such as baby bonds.
Throughout its response, BAM calls for simplification of regulation and less Government intervention on product design. In particular, it wants to see the Isa regulations simplified.
It says these are the key issues to address if the Government is to meet its aim of increasing consumer understanding of financial products and the value of advice.
BAM believes the clarity of collective investments is not given enough credit in the Sandler review and questions whether the review is impartial, saying “some of the language used is questionable for what is supposed to be an open-minded review”.
Sales and marketing director Francis Ghiloni says: “Britannic is strongly opposed to the introduction of further regulation as the high cost of regulation serves to exclude people on lower incomes from the market.”
IFAs do have the investment knowhow
Norwich Union has come out in defence of IFAs and their levels of investment knowledge.
The review had criticised IFAs level of investment knowledge but NU has gone to some lengths to demonstrate IFAs are fully competent in this area. It suggests to Sandler that IFAs do consider the fundamentals of investment performance rather than just looking at providers and products.
NU makes a strong case that commission levels are evolving without the need for further intervention. It says a wholesale withdrawal of commission would result in a significant reduction in distribution. Overlapping regulation on products and sales processes has dramatically reduced distribution and caused a considerable savings gap, claims the life office.
NU voices strong concerns over further pricing regulation, saying although providing face-value, low-cost products stifle innovation and investment in distribution.
Sales and marketing director Peter Hales says: “We go to some lengths to show there is a margin in commission to fund elements of distribution. We have made a number of suggestions on how to achieve greater transparency on commission. IFAs do have greater investment knowledge than implied by the consultation document.”
With-profits business is distorted mystery
Skandia has launched a scathing attack on with-profits life offices.
It says life offices with orphan assets distort the marketplace and do not allow for a level playing field with unit-linked funds. It argues that reduction-in-yield figures are artificial and do not represent true costs to consumers.
With-profits investments are popular because of high commission, says Skandia, and companies have been under pressure to drive up business to look attractive in a period of takeovers and mergers.
But it says consumers have a clear preference for paying for advice through commission rather than fees and it does not agree with commission intervention.
Skandia speaks out against the cost of increasing regulation, saying the rules are “confused, conduct is not adequately policed, discussions with FSA staff produce random advice and ultimately a washing of hands”.
It says product design and pricing is best left to the industry and warns there is a danger a small number of large players will dominate the market.
Pensions development manager Brian Newbould says: “With-profits asset allocations are a mystery. There is no one who acts on behalf of existing policyholders about bonuses, returns, expenses or smoothing. There is no evidence to suggest with-profits funds do reduce volatility for investors.”
Move to unit trust pricing
CIS is calling for an end to high front-end charging on with-profits and a move towards unit trust pricing in its Sandler response.
It also proposes a halt to further regulatory intervention, believing this will drive out advice and lead to greater financial exclusion.
Its main points are:
Concern the review will lead to further restrictions in savings opportunities for ordinary investors.
Any additional regulatory costs or further restrictions on margins will severely limit the ability to tackle social and financial exclusion.
Customers value the reassurance and confidence an intermediary can give.
Fee-based advice will remain in the minority.
With-profits can and should be modernised.
Don't put a cap on commission
Clerical Medical warns against introducing a commission cap, saying 1 per cent charges are already bringing down commission.
Its main points are:
IFAs do not just provide advice, they act as a distribution channel by encouraging people to save. The review seems only to consider the advice aspect of IFAs
Commission is already reducing because of the introduction of 1 per cent charges and complex contract penalties are also disappearing, meaning the review is addressing yesterday's problems by saying IFAs concentrate only on commission.
Intervention in commission is risky and removing commission completely could put many IFAs out of business, leaving a distribution problem.
IFAs are a force for public good
Standard Life is calling on Sandler to recognise the importance of IFAs as a force for good to the consumer.
Its main points are:
IFAs are very important in promoting savings and investments and any change must not undermine access and availability to independent advice.
IFAs exist because of consumer demand. Consumers want IFAs and that is why they are the dominant force.
The IFA sector acts to bring efficiencies to the market, stimulating competition between providers meaning customers get better value and driving down costs.
With-profits give people a way into the market with an equity-backed investment with lower volatility.
Look at the facts today
Aegon wants the Sandler review team to make sure any changes are based on hard facts, saying IFAs act in the consumers' interest.
The review should go ahead from where the industry is today and not react to problems which are being improved
The ABI's Raising Standards initiative will address many areas of Sandler's concerns.
IFAs act as a consumer surrogate to get the best deal for clients.
Employers have a vital role to play in financial services, particularly pensions.
Arguments of fees over commission are purely academic. An insistence on fees will further discourage consumers from making provision.
With-profits investments are wanted by many consumers and have encouraged people to save.
Regulation increases exclusion
Scottish Life says in its Sandler submission that unless advice is readily available, regulatory control and quality-marking of products will not ensure effective distribution.
Its main points are:
Product regulation is unnecessary if consumers have access to properly trained advisers, along with adequate product disclosure.
Consumers need encouragement to make adequate provision. This can only be achieved by having sources of advice readily available and accessible to all. Regulation is increasing the exclusion of the less well-off from the long-term savings market.
The influence of corporate purchasers is set to grow and should be encouraged through tax incentives.
With-profits products continue to offer a very strong appeal for long-term savers in all customer segments.