The FSA has agreed in principle to incorporate the ABI's quality mark accreditation scheme into its ...
The FSA has agreed in principle to incorporate the ABI's quality mark accreditation scheme into its proposed comparative league tables.
Quality marks are to be given to brands that meet a set of standards that are being set by the ABI-led Savings and Long Term Risk (SALTR) committee. The committee has been working on getting agreement from the FSA on the inclusion of the standards into the proposed league tables information.
The FSA has stated it has agreed this in principle, even though it has not included this fact in its consultation document, and it does not plan to consult any further on the league tables. How the standards will be included will be revealed when the FSA releases final information on the comparative tables later this year.
According to minutes of a SALTR committee meeting held in early November, the FSA, Treasury and consumer organisations have been broadly supportive of the standards being devised.
While being seen as a step in the right direction, it was noted that each organisation wanted more information and detail on the ABI's plans and considered wide adoption of the standards by product providers as being key to their success.
The ABI has been keeping details on the standards quiet while these go through finalisation at the committee level although they have been outlined in some detail in documents obtained by Investment Week.
Broadly the standards involve improving consumer attitudes towards the life industry by improving the clarity and comparability of information, appropriateness of the product sold and customer service.
Over the course of the past year consultants hired by the SALTR committee and its sponsor members have been developing the standards that would be involved in these areas. The main changes include consolidating product charges into a single charge, eliminating the use of confusing terminology such allocation rates and bid/offer spreads, standardising key features documents, extending cooling off periods to two months, offering better guarantees for products sold and restricting the use of market value adjustments on with profits products.
IFAs have not been widely consulted in the discussions about the creation of these standards and to date many IFAs still know very little about the quality mark scheme. This is despite the fact that the ABI acknowledges that IFA support is essential if the project is to continue.
In late November the ABI formed a committee to look at IFA concerns that arise from the standards. The IFA committee consists of Jeremy Budden of Willis National, Michael Grant of Countrywide, Tracey Harvey-Bussell of Advizas, Paul Smee of Aifa, Simon Clamp of Aegon, Laurie Edmans of NPI, Sandy Hogg of Scottish Widows, Heather Logan of Scottish Amicable, Graham Storrie of Standard Life, Steve Wigzell of Winning Strategy and two unnamed IFAs from smaller firms.
Some of the main issues that will be debated within the committee include the appropriateness of product purchased promise that appears to be more advantageous to direct sales forces than IFAs.
Under appropriateness of the product, SALTR promises that consumers will only be advised to buy things which consumers need. If at any time it is clear that an investor was inappropriately advised given the information provided at the time, then he would be entitled to get back all the management charges along with the market value of the investment.
Justin Modray, an IFA with Chase de Vere said: "It would depend on what their definition of appropriate advice would be. There can be many different definitions and grey areas depending on the situation. In general though this is important for direct sales forces to have to adhere to. They often do not give good advice and this will help give consumers more confidence in the advice they are receiving and give the industry as a whole a better name."
Mark Dampier, head of investment research at Hargreaves Lansdown, said: "This money back guarantee is useless. It is not really a guarantee if someone, who was missold a product, gets only the market value of the investment back. What happens if the market had gone down? If individuals were mis-sold a product they should get everything back not the market value."
Another area of IFA concern is the plans to create a benchmark for advice as part of the benchmarks being set up for customer satisfaction, under the customer service standard. It is not clear whether IFAs will be included in this proposed benchmark. If it does include intermediaries this raises the prospect of life offices dictating to IFAs what their professional standards should be.
There is also the issue of the consolidation of charges on products and how IFA commission will sit within this regime. It has been agreed that all charges be presented as one and clearly explained but whether or not it would include remuneration for advice is as yet unclear.
Alasdair Buchanan, head of sales and marketing at Scottish Life said: "Many product providers are trying to get information on SALTR so it is no surprise the IFA community is feeling left out. It is still not clear how IFAs fit in or how companies such as ourselves who sell entirely through IFAs will be able to obtain accreditation under these standards."
See page 23
Service increasingly key
Aiming to be' top three' UK financial planner
Lowest measure since index launched in 1995
Complaints into double figures
Despite lower median annual earnings