"Better than best" rules should be replaced by "no worse than" regulation if adviser status and pola...
"Better than best" rules should be replaced by "no worse than" regulation if adviser status and polarisation are changed, says the Investment and Life Assurance Group.
According to ILAG's response to CP121, this would ensure advisers owned by life offices are not unfairly influenced and that they still recommend the best products available to the consumer.
It is inevitable that providers will try to influence intermediaries in which they have a stake, if proposals to introduce authorized financial advisers, or multi-ties, go ahead because providers will be investing "not only for the return on capital but for the ability to influence selling practices", suggests ILAG.
Current FSA "better than best" rules require intermediaries ensure products from providers which have links or a stake in their own business are "better than best" products offered by other providers.
ILAG is instead suggesting companies should be required to adopt "no worse than" rules and explain in writing why the products offered by their investing provider are no worse than any other", as it already required when looking at the difference between personal pensions and stakeholder.p>
While it would be naïve to say an IFA would not want to increase the profitability of an investing provider, says ILAG, the risk of not selecting the most appropriate provider would be increased, and would therefore be contrary to consumer protection.
However, it would back the introduction of adopted products as this would any provider with a 'hole' in its product range to fill the gap with a product from a rival provider.
"ILAG has always advocated the introduction of adopted products. This is the simplest way to increase choice for the widest range of consumers," says the report.
"Consumers would have more points of access to products such as tax-exempt friendly society policies. Providers would not be compelled to manufacture products where they have little expertise or cannot be competitive. Instead, they can select the best products in the market for their clients."
Few organizations have so far commented on the introduction of a "lower tier" advicehowever, ILAG says it would support such an idea, providing an alternative name can be given other than "lower tier" which it says implies second class advice.
A simple range of 'safe' products such as catmarked or protection products could be sold under the second tier where poor investment is not a concern, says ILAG.
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