The introduction of a generic advice service combined with the retail distribution review could change the regulatory landscape to allow IFAs to ‘focus' their advice and not have to complete unnecessary paperwork, according to the FSCP.
Speaking at the Resolution Foundation’s conference ‘Generic Financial Advice: From Vision to Reality’, John Howard, chairman of the Financial Services Consumer Panel, says one of the key areas of the new system to address will be how it fits in with the current advice market.
He says one of the important issues will be who the generic advice service ‘hands off’ the customers too, as he warns there’s a risk people will be sent out into the marketplace and be confronted with an overwhelming amount of qualifications and advice.
As a result, he says the retail distribution review being carried out by the Financial Services Authority (FSA) has the power to revolutionise the landscape, as at the moment consumers have the choice of advisers tied to high street firms with sales targets, or IFAs who - quite a lot of the time – are paid by commission which varies by the products they sell.
Howard points out the review will have to address these issues, including looking at ways to remunerate IFAs to take the bias out, as he warns it is not fair to hand people who have been nurtured by the generic advice service, onto a system which won’t necessarily provide the product they really need.
He adds: “The review also needs to allow IFAs to offer what the FSA is calling ‘focused advice’, which means not carrying out checks for products which aren’t required. These are aspects which have to be addressed.”
“This will be one of the most important things the FSA has done, if it has the courage to follow through, as it has the possibility to revolutionise the financial services landscape, but at the same time it needs to fit in with the generic advice solution,” warns Howard.
Christine Farnish, public policy director at Barclays, and former chief executive of the National Association of Pension Funds (NAPF), agrees generic advice will fill a big gap in the advice market.
And she adds; “The fact the FSA is looking at distribution in a serious way is very encouraging, as it should lead to a simpler, less expensive business model moving 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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