Royal London urges FSA to police customer agreed remuneration rules
Friday, 14 December 2007
Royal London, the UK's largest mutual life and pensions company, believes that greater clarity around product cost and advice structures, along with tightly defined FSA rules on Customer Agreed Remuneration (CAR), would provide positive help for customers to understand and value financial advice.
In its response to the FSA's Retail Distribution Review (RDR) Discussion Paper, Royal London recognises many of the market failings identified by the Review. In particular, the way in which the overall charges for financial products are presented makes it very difficult for consumers to distinguish between the costs of the core product and the costs of the advice and related services. This complexity often means that customers struggle to understand the proper value of the financial advice they receive.
Royal London believes that the FSA should develop its thinking further in relation to the rules around CAR, so requiring product providers to compete on the basis of product quality and innovation and not on the basis of remuneration to advisers.
The Royal London response also calls on the FSA to consider carefully the impact of indirect benefits (or soft commissions). This is particularly important as the improvements in consumer perceptions of the industry that are anticipated from the widespread introduction of CAR could easily be undermined if even a small minority of businesses are found to be indulging in what would be seen as 'sharp practices'.
John Deane, Chief Executive of Royal London's Intermediary Division, comments:
"We believe that the provider's costs for all long-term products – including protection - should always be disclosed separately from the costs of distribution. This will help consumers to understand much more clearly what they are paying for. It will also enable consumers to value the services they receive which, in the long-run, should curtail inappropriate remuneration-driven sales and switching of products.
"Royal London also believes the suggested General Financial Adviser category would bring confusion to the market and would probably devalue the service offered by Professional Financial Planners. We disagree with the suggestion in the RDR that Professional Financial Planners would have to attain the full chartered status; a diploma in financial planning would be a perfectly adequate base standard, being higher than current requirements and also realistically attainable by most current advisers."
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For further information please contact:
Royal London
Gareth Evans
Head of Corporate Affairs
Tel: 020 7506 6715
Alasdair Buchanan
Group Head of Communications
Tel: 0131 456 7133
Polhill Communications
Jenette Perry
Tel: 020 7655 0530
Editor's Notes:
Royal London Group, is a specialist financial service provider. Its businesses focus on those sectors of the market which value premium propositions, operating through a number of brands:
- Scottish Life – UK pensions market
- Bright Grey – UK protection market
- Scottish Life International – offshore investment markets
- RLAM – fund management
- RLAS – life and pensions administration
Royal London is one of the stronger life and pension companies in the UK, and has a strong track record for with-profits performance.
Royal London is the largest mutual life and pensions company in the UK with Group funds under management of £32.9 billion. Group businesses serve around three million customers and employ 2,580 people (figures quoted are as at 30 September 2007).