David Barral, Norwich Union's distribution director, says advisers in firms which are partly or wholly owned by providers should not be called 'independent' in a post RDR world.
He believes the RDR discussions on independence should include a debate on the ownership of advisory firms which would include the provider's own involvement in the Tenet Group, where it has a 20% stake.
“The discussion of independence from the ownership of any provider needs to happen," he says.
"Independent firms need to be free from conflicting interests. It is a question of the perception of these firms and gaining the trust of the consumer."
Barral says the introduction of Customer Agreed Remuneration (CAR), or a similar model, for all advisers is essential.
He adds only those advisers using CAR who are not provider owned and look at the whole of market would be entitled to use the ‘independent’ tag.
“CAR should apply to all advisers," he says.
"Consumers currently don’t understand what they are getting and there should be a clear separation between the cost of the product and advice.
"It will change the nature of relationships from that between providers and advisers to advisers and their clients. Very transparent, good advisers have nothing to fear from CAR and that separation should engender more confidence.”
Barral says NU currently has some group pensions working on a CAR footing and is planning to launch a bond with factory gate pricing early next year.
Plans are also afoot to accelerate the introduction of factory gate pricing across the business and Barral says the group will be ready well in advance for when the new rules come in.
Barral says there needs to be a big shift in the professional standing of advisers. However, he is against ‘grandfathering’ or counting advisers’ experience towards their qualifications.
He says: "We do not think chartered status is necessary but we think the bar should be raised to diploma standard.
"We should give incentives to those people with the experience to take the diploma and there should be a healthy transitional phases to allow them time to do it. I would challenge IFAs and say is the diploma really too big an ask?
“Even if you have been an adviser for 20 years you will still need to take the exam. You can’t holds yourself as a professional and say you have no time to do the exam. It should be easy for these people to do.”
He is also calling for a professional body to be established which would set standards and a code of practice and could strike advisers off, as is currently the case for solicitors and accountants. The ethical standards body of the CII could be a possible base for this.
Another key part of NU’s RDR proposals is to see primary advice replaced with a direct information service focusing on consumers who haven’t bought products before.
The group would set up its own service possibly using its own sales force or it could buy one in. Some IFA firms could also move into providing simpler, online case business, Barral believes.
“We are keen to stress this would not be advice but assisted purchase. The scheme would bring in new blood and these people will ultimately need advice in the future.”
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First mentioned in Cridland Report
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