Computacenter chairman commissioned to produce report
Last week Ron Sandler issued his consultation paper on the retail savings review immediately eliciting criticism on the tight timeframe and its scrutiny of the intermediary channel.
The two-month consultation period is being pushed through at a fast pace so that the Chancellor can pronounce on it in the next Budget, according to Steven Cameron, pensions development manager at Scottish Equitable.
Cameron said: 'Cabinet Office guidelines released last year stated that different industries should have at least three months to respond in a consultative process unless it was an emergency which this is not perceived to be.' He argued that the timing of the report has been kept vague. Sandler has said that the process will be completed in the first half of next year.
Investment Week talked with Sandler following the launch of the consultation process.
Why not allow the market to develop and allow competitive pressures to decide some of the areas you have discussed?
I'm a great believer in market forces operating as freely as possible. I'm happy to have that as a starting predisposition. But we are seeking to ask whether the market does operate efficiently and well enough left entirely to its own devices or whether there are requirements to assist the operation of market forces in different ways. Because of the amount of funds under management in the industry and because there is evidence that consumers are not highly empowered, that consumer influence is weak, I think these are legitimate questions to pose.
How will you avoid duplication with other initiatives and reviews such as the FSA, with-profits review and Saltr?
By working closely with the relevant bodies.
Can you come up with a different conclusion from the reviews on polarisation and disclosure?
Yes, it is possible. We will be working closely with the FSA. We are concerned that the burden of response to the industry is minimised.
How would you respond to the comment that the decision on polarisation has already been made?
If you are asking if the FSA has made a decision on that, you would have to ask them. But the Chancellor has imposed nothing on this work in terms of any predetermined outcomes. He is concerned to ensure the industry is efficient and that is why he has commissioned this review. The scope is entirely up to my team and I.
What is the role of regulators? Why do we need all these reviews as well?
The regulator is concerned to ensure that the consumer is protected from extremes of detriment, it is not an economic regulator. It is not there to ensure that the industry is efficient, for example.
My review looks into how consumers are removed from the asset allocation decisions that will ultimately lead to the way assets are allocated and investments are made. Secondly there are questions about the overall efficiency of the industry which my review is seeking to address.
Will you be comparing the financial services industry, which is one of the most highly regulated, with other UK industries?
The regulatory regime is clearly something we have to look at because it impacts on the way competition operates in the industry. I don't anticipate making direct comparisons with regulation in other industries unless people point us to other regimes that they think are appropriate.
Should intermediaries have to pay for all the support and products they get from providers in a similar way to the pharmaceutical indus-try?
Rewards other than monetary ones are available. We will have to look at the incentives that follow from those rewards. There are many ways in which product providers interact with the intermediaries. At this stage we are interested in how the industry works and what governs behaviour and competition in it. Once we have more information about that we will be able to ask more penetrating questions about the appropriateness of the regime and where improvements may be possible.
Will you compare financial services with overseas industries?
We have invited people in the consultation document to look at overseas areas where they think there are interesting lessons to be learned and to draw our attention to them and to find out what makes the UK system different.
Will you look into annuities?
I'd be very surprised if we looked into them. I understand that there are issues about compulsory purchase but this is not a review of policy but the efficiency and effectiveness of the retail savings and investment industry.
Do you acknowledge that the cost of compliance is a factor that is pushing up charges?
A number of people have suggested that to me but as I have not conducted any analysis I can't have any view at all.
Will you be looking at how investment products are marketed?
We will look at how products are marketed and at the issue of branding. We will look at information flows in the industry and what consumers and advisers are told and how that information is distributed.
Should IFAs be separately qualified if they are to sell investment products? Is there a need for more regulation of investment advice?
It has been suggested to me that IFAs are more skilled in the area of tax and general financial planning than the provision of investment advice specifically and having the tools and techniques to advise on investment strategies.
Do you think that intermediaries in small outfits are less likely to offer lower quality advice because they have less investment expertise and support resources that those in larger firms?
I think that we will need to understand the structure of the IFA industry and what the impact of that structure has on the way the IFA community works. My experience of other industries wouldn't lead me to the conclusion that small independent specialists are necessarily less equipped than large groups.
Issues under review
• Extent of consumer influence
• The corporate purchaser
• Information to consumers: the regulatory framework
• Personal finance media and other information providers
• Choice of channel
• Intermediaries: commercial incentives
• Intermediaries: regulation and scope of advice
• Intermediaries: impact of other market forces
• Trends in industry structure
• Investment decision-making in product providers
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