Trackers, including Cat-standard ones, cannot be included in Sandler's proposed off-the-shelf stakeh...
Trackers, including Cat-standard ones, cannot be included in Sandler's proposed off-the-shelf stakeholder product range, as he limits investment to managed funds.
Sandler has said Cat standard products should be subsumed into his proposals for a suite of stakeholder products, which include a pension, with-profits product and a unit trust or managed fund.
Similar to existing Cat-standard products and stakeholder pensions, they would feature no initial charge and have a 1% cap on fees. They would differ in that Cat standard products do not have any explicit controls on exposure to financial markets risk.
In order to reduce risk in the proposed stakeholder suite, funds in which the products invest must be suitably diversified, he said. To achieve this, the unit trust or life fund would have to take the form of an actively managed managed fund.
Sandler said he would like to see the product have a minimum component of fixed income with the whole of the equity component not invested in one single market or sector.
As just over half of Cat-standard funds currently track just one index, these proposals would eliminate these vehicles from the proposed stakeholder regime. A small number of providers offer actively managed portfolios within the 1% cap, including Barings, Legal & General and Norwich Union.
Sandler foresees the distribution of these off-the-shelf products via high street banks, supermarkets and employers, however, product providers would ultimately be responsible for any mis-selling of these products.
Providers would be free to market them without adhering to the bulk of the FSA's conduct of business rules ' no requirement for those selling the product to be FPC3 qualified, no requirement with regards to suitability and no requirement to know the customer.
If the product warnings are not properly delivered, the basic principle would be that the product provider is responsible for the way in which the product is sold, Sandler said.
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