The FSA has announced what had seemed inevitable given the pressure on them to maintain high standards of suitability in the face of unprecedented consumer concern.
In the forthcoming RDR environment, advisory firms will continue to have full responsibility for the sale of financial products. On the face of it, this seems like a sensible decision. The Financial Services Consumer Panel has always been resistant to the idea of consumer responsibility and reluctant to introduce any degree of caveat emptor into the relationship between advisers and their clients, but this is not without significant drawbacks.
The current indebtedness of many people in the UK is well documented and the result of unparalleled access to easy borrowing. The relationship between lenders and borrowers has long been regulated, but arguably with much to be desired about the resulting outcomes. But how often has a cry of ‘buyer beware' gone up in relation to access to credit cards or loan capital?
Basically, I am really struggling to see why we are happy to let the marketplace polarise so distinctly in the future between those who will be able to afford to deal with well qualified professional advisers and those who will not. Because the gap that leaves behind in the mass market will have no advisory balance to counter the demands to spend, and enjoy now, rather than save to enjoy the future.
The average consumer has multiple routes to credit. They can be accessed quickly and without fuss and the paperwork and agreements required to complete the initial transaction can be finalised within 30 minutes or less.
So why wouldn't a similar environment be appropriate for simple, transparent savings and protection products, designed to minimise the risk to the average consumer and result in a reasonable outcome for the majority? Up until recently it was thought that simplified advice might provide such an opportunity, but with the same qualification criteria as independent advice, and the same suitability requirement, it remains to be seen how the cost and risk associated with the model can be accommodated.
I can make no sense of a rationale that imposes a significant cost on the marketing of mass market savings and protection products whilst leaving the routes to the antithesis of savings easily and efficiently accessible.
Before you think I am advocating additional regulation of credit access for the mass market, I am not. I am advocating a level playing field where people can be made aware of the lifetime choices they make when they choose to save or borrow at an equitable cost. Not one which makes the mass market a ‘no go' area for all but the most basic of savings vehicles, and with it drives away the main opportunity for advice that most people would benefit from.
Note: The opinions expressed by the author are his own and are not necessarily those of the company he represents.
Steve Folkard is head of pensions and savings policy at Axa Life
Partner Insight: Cathi Harrison, director of para-sols and Apricity and Clare Farrell managing director at Northfield Wealth met in London recently to discuss how to stay on top of regulatory risk.
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