Money News
New proposals by City watchdog, the Financial Services Authority (FSA), for providing financial advice, could prove costly for customers. So claims the British Bankers' Association (BBA).
It argues that any proposals to curtail or ban tied advice, where a bank advises only on the range of products it provides, would force customers to choose between paying a fee for advice and using a non-advised service. This could have a significant impact on customers' access to mass-market, cost-effective, key financial products.
This would impact most on those who may lack adequate savings or investments, and would conflict with various FSA and Government initiatives to encourage people to save for their future.
The association said that it will be following up its concerns with the FSA and will in particular want to explore whether the FSA's concerns on consumers' perception of sales and advice can be addressed through improved disclosure.
Angela Knight, chief executive of the BBA said: "Many customers have a good idea of what they need and want to get advice and buy their financial products from a brand they know and trust.
"The FSA proposals could remove this option, leaving individuals with the choice of either more expensive options or buying without advice."
Knight adds that of course the industry is in favour of improved clarity for consumers, but this shouldn't come at the expense of consumer access to trusted and cost effective advice. Indeed, the FSA should think very carefully before introducing changes that may restrict customer access to advice, which is contrary to one of the key objectives of the review.
The FSA's paper includes proposals for a three tier market:
1- A new look, single tier professional advice sector with higher standards than today, built on advisers acting in the long term interests of their clients.
To be called an adviser, the advice offered must be whole of market.
The remuneration model must be determined without input from providers, but adviser costs payable through the product are permitted.
Qualification levels need to increase, but to a level more aligned with Diploma than Chartered status.
The tied and multi tied community will not be able to operate as financial advisers, or be allowed to infer to consumers that they are offering advice.
2 - A sales regime
This will be strictly 'non-advised' consisting of guided sales and execution only and can operate within the current regulatory framework.
The FSA will only change regulations to introduce a new sales regime if the industry makes a strong enough case for it.
3- A third tier of money guidance to sit outside of the regulatory regime.
Designed for consumers who are currently alienated from the industry, it will provide basic guidance on financial matters.
No product sales or recommendations will be permitted.
It will effectively act as a triage service, pointing consumers in the direction of sales, advice or self execution.
More detail will be worked on over the coming months.
29 April 2008 © Moneyextra.com
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