Another front has opened up on the FSA's proposals to turn the Sandler suite of simplified products ...
Another front has opened up on the FSA's proposals to turn the Sandler suite of simplified products into reality with the publication of the IMA's response, which says the imposition of a 1% price cap on the industry may make it impossible to provide an adequate level of advice, even where the involvement of advisers is limited.
The IMA argues that to drive demand the government must first drive supply in order to ensure low-income earners get the range of products necessary to drive up savings rates.
But imposing a 1% price cap on providers will make it difficult to avoid future problems of mis-selling and other issues, because it will not enable the provision of enough suitable advice.
"Investment products will not be suitable for everyone: it is important that any process the FSA comes up with takes into account people's debt and protection situation, as well as the need for some 'rainy day' reserves," the IMA says.
Of the three frameworks put forward in FSA Discussion Paper 19, the IMA favours the Guided Self Help option as the one offering most promise.
Unguided Self Help is not the answer, the IMA says, because "we do not think that the type of consumers for whom a simplified product might be suitable will readily absorb the information and warnings which the FSA expects to be given.
Guided Self Help is the better option because it would at least offer a layer of filter questions, although the IMA adds that the FSA needs to undertake further consultation on just what those questions should be.
The third option put forward, Focused Advice, is not tenable if the 1% price cap is imposed, the association says.
Another risk identified by the IMA relates to the perception of government backing for simplified products.
This reflects the FSA's own findings of consumer attitudes towards stakeholder pensions, which found that many consumers felt tighter rules implied some sort of government "guarantee" for the capital involved.
Raising the spectre of stakeholder and the 1% price cap means the FSA is increasingly boxed-in in terms of options for regulating simplified products.
The FSA Consumer Panel has already said the balance between consumer protection and access to cheaper products is not right and it will not support any of the proposals put forward so far.
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