The Consumers' Association has launched a scathing attack on the Financial Services Authority for fa...
The Consumers' Association has launched a scathing attack on the Financial Services Authority for failing to improve financial conditions and understanding for consumers, adding it was now up to IFAs to "do the work of the FSA".
Speaking at the Standard Life With-Profits Review conference this morning, Mick McAteer, senior policy adviser at the Consumers' Association, accused larger shareholder-owned life insurers of using with-profits funds to boost its shareholders returns and financial position, intimating that it was only intermediaries who could now persuade life insurers to change their practices by taking business elsewhere.
"[Reform of with-profits] means IFAs will have more information and will be in a position to protect consumers. But more information means more responsibilities," said McAteer.
"I'm very pessimistic about the impact of CP121 and the with-profits review. The Consumers Association is clearly on the IFA's side, to do the job the FSA should be doing. It is clear they have passed the buck. I would ask you [the IFA] to do their jobs for them. Be selective about the companies you look at and support the best practices, but punish the worst."
On several occasions, McAteer argued the consumers was being poorly served by current with-profits reform, suggesting the FSA had actually heightened rather than deflated the hold of "opaque" companies in the financial services sector.
In a presentation highly critical of the Financial Services Authority, McAteer laid out in detail what consumers need from with-profit products and whether proposed reforms to corporate governance, transparency and information flow would work.
The CA supports the ideal of with-profits, McAteer pointed out, however, getting rid of the appointed actuary and setting up a with-profits committee is likely to give the companies more rather than fewer powers over the with-profits fund.
McAteer also suggested attempts by the FSA and the Treasury - through the Sandler Review - to open competition in the market will actually allow the largest, shareholder-owned companies to "thrive" rather than help the consumer.
"I'm not entirely sure that once the review has moved along, we won't see the fundamental flaws [of with-profits funds] come through again. I suspect that the directors will take advantage of these flaws [to the detriment of policyholders].
"One of the biggest criticisms [we have] of the FSA and the Sandler reviews is not one of them really addresses the needs of policyholders who are already in with-profits funds. The last thing we actually need is more products when there are 30,000 products on the market. Choice is irrelevant, but the quality of choice is. There is definitely a hierarchy of advice, with the IFAs consistently outperforming. There is also evidence that they provide low cost products in comparison to the tied agents and banks."
McAteer also put forward several ideas as to how the industry might improve understanding and governance of with-profits funds for consumers.
In particular, he suggests providers might limit the decline of with-profits funds' returns by making a distinction, between those who carry smoothing and those who offer guarantees, so they have either one or the other.
Most support from the conference and its IFA audience was in favour of with-profits products.
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From June 2019