The Retail Distribution Review provides advisers with an opportunity to move into a longer term customer focused business strategy, and opens up more possibilities for factory-gate pricing, claims Winterthur Life.
Mike Kellard, chief executive of AXA Wealth Management and Winterthur Life, says although he is not sure the present business model is bust, “there is a widespread perception it is, and if nothing is done to change this perception, then there will definitely be severe implications for the long term future of the industry”.
As a result he says he “personally welcomes the FSA’s work in this area” as he points out trust in the industry, in product providers and in advisers has taken a “huge hammering over recent years”, leaving consumers generally either wary or outright opposed to the life and pensions market.
Kellard argues the aim of the Review, which was launched in June last year, must be to close the gap in trust and improve the business model so consumers understand and value what they are getting from the industry and through value added advice from advisers.
But he adds: “This does not mean commission is bad, or that fees are superior. It means customers need to be clear about what they are paying for and the services they will receive as a result – a factory gate priced model can work here. As a customer who feels in control of how much they pay is likely to seek out services they value.”
The FSA announced last month it will be publishing the findings of the Review at a conference on 27 June, so Kellard has set out three objectives which the findings should aim for:
- To unite behind a common goal to rebuild the industry’s reputation for the benefit of all
- Consider factory gate pricing as a means - not an end - to create a clear, transparent model which consumers appreciate and trust
- Put customer service at heart of reform
Kellard says while financial advice is important for the well-being of consumers, there is a need for government and industry to re-engage in the delivery of improved financial capability, as better informed and educated consumers will appreciate and trust an industry which is transparent about the services it provides and the way it charges for them.
He adds: “We should unite behind a common goal - to improve consumer trust and understanding by calling for the industry to adopt a more mature approach to the debate around different business models, and stop polarising the debate at the extremes which suggest fees are the answer and commission is the problem - meaningful disclosure to customers who understand their choices is the way forward.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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