Aviva calls for FSA to set out simplified advice guidelines

Good luck! I don't think that anything related to this government is capable of simplifying anything. Aviva are right to put pressure on the FSA as the FSA do not appear to have the availablility of advice for all consumers at the heart of thier agenda. May be I'm missing something, but the uptake of financial protection and savings plans, including pensions has fallen amoungst those who need it most, since the cost of regulation put the man from the Pru and similar out of business.

Let IFAs do the more complicted work that we are good at, but for the sake of the masses offer a clear and simple route to creater uptake of financial provision.

I'm off now!

Why are the majority of commentators’ not being heard on this matter. I have started the following petition please feel free to voice your opinion with No10.

http://petitions.number10.gov.uk/FSA-RDR/

If you agree with the statement below please sign the petition and pass the details to your colleagues.

We the undersigned petition the Prime Minister to investigate the potential loss of affordable Financial Advice by the FSA's implementation of the RDR. Thousands of people, employed in the Financial Services Industry, can see the writing on the wall for the end of affordable Independent Financial Advice and the loss of skills and experience from our industry that will inevitably be the main result from the proposed RDR in its present form. The same voices were raised with the regard to Stakeholder Pensions; we weren’t listened to then and the results speak for themselves. Let us hope we are heard this time and the right action is taken. We the undersigned implore the government to have an all party review of the cost to the industry in both monetary terms and lost skills and the detrimental ramifications to the consumer by a reduction in the availability of advice in an affordable format.

http://petitions.number10.gov.uk/FSA-RDR/

There's about as much chance of the FSA coming up with useful, practical and workable guidelines for simplified advice as there was for getting it to articulate its requirements with regards to TCF (since declared by Hector Sants to have been a failure ~ nice one, JT).

In all probability, the FSA has no idea as to what the scope and limitations of simplified advice should be.

Wanna pension ~ yeah, one of these cheap and cheerful stakeholder things should do. You want to pay in HOW much? Eeeee ~ a bit outside the realms of what we advise on here. £50 p.m. is about our league.

Wannan ISA? Yeah, one of these cheap and cheerful index-tracking funds should suit. Diversification? Wot's that?

Income Protection? Ah, bit trickier that one. Not really what we do, all a bit admin intensive.

Your existing Investment Bond? Ah, no, we don't do reviews of what people already have. Just new stuff.

A balanced and tax balanced investment portfolio for your recent large inheritance? Hey, hold on ~ I only said we're cheap, not that we're any use for anything but simple, and ultra-basic new products.

Sounds to me like what you need is an IFA. That is, if you can still find one taking on any new clients at a remotely affordable price.

What are these stupid people thinking?

Our lives are frittered away in detail. Simplify! SImplify! Henry D.Thoreau.

I was in the library the other day and got chatting with some bloke.

he said: "D'you like Dickens?"

I said: "Dunno ~ never been to one."

Interesting concept and sounds simple enough when you say it quickly. Being a bloke and therefore maybe quite simple in my approach I thought it would be useful to see how the OED defines the two words.

First 'advice'. ''guidance or recommendations offered with regard to prudent action''. That's simple enough.

Now 'simple':

1. ''easily understood or done; presenting no difficulty'' - OK so far.

2. ''plain, basic or uncomplicated in form, nature or design without much decoration or ornamentation'' - I can do that [it's a bloke thing]

3. ''composed of a single element'' - Easy enough.

4. '''of very low intelligence'' - Aha, move swiftly on!!

I then started thinking about the combination of the two words in the context of a few of the basic tenets of the advice process and typical client requirements:

Tax considerations - I'm just looking forward to the forthcoming pre budget report on how the tax system is to be reformed and simplified. I'm confident it will happen!

Pensions - State. Surely everyone understands how this works

Pensions - Private. Luckily these were greatly simplified in 2006 and made further transparent in subsequent budgets.

Investments - No problem as there are only a few different types of funds, products, risk and tax considerations.

Protection - How much and what type do you need? Would you like a trust with that?

Mortgages - No problem at all as we don't arrange them but I'm sure they're straightforward enough and easy for all to obtain.

Tax planning - see above.

Now I have believe what the FSA says so am confident a definition and effective process for simple advice will be forthcoming shortly but that's just me [see OED - 'simpleton']

Other non-believers [heretics all] who are more cynical may however suggest the noun 'simplism' or adjective 'simplistic' are more appropriate.

Fortunately it appears that definition 4 above is how we are generally viewed by those we have to believe!!

We have 1 million plus bank complaints sitting on the FSAs desk with no action at all taken.

These complaints cost our industry a fortune and ultimately the client. They also create endless rule changes which are not producing the desired end result, or these complaints would be at an acceptable level.

Since the RDR does not address this issue and every solution from the FSA appears ever more complicated, then surely simplied advice could only create greater problems?

The FSA needs to get these complaints under control and solved before it amkes any more moves or places low level regulation sales in the hands of the worst complaint culprits.

This should be about consumer protection, keeping costs down to the public and creating confidence in the market.

They need to get this under control before they give a free reign to the very institutions creating all of our industry problems.

We could be looking at millions of complaints if this is rolled out and the scenario Juliet Stevens highlights surely cannot be acceptable or what is the point of any of us raising our standards? Only pricing real advice out of the market place altogether.

I suppose they will introduce the longstop for simpified advice!!

I think it's entirely right that Aviva should be putting pressure on the FSA to set out their stall on Simplified Advice - because, at the moment, they're failing to provide any effective measures.

All we have, moving beyond the murk of restricted advice, is a Simplified regime which looks expensive and unattractive to the bulk of the market and Basic Advice. Enough said, I think, about Basic Advice.

The problem is that this issue of Consumer Access is not, particularly, an FSA concern - this is something the Treasury are keen for, in helping rectify the savings gap.

But the FSA trying to cram it into their regulatory agenda? I think it's plain to see that they haven't adopted it, and haven't made any substantial progress with it.

They're more likely busy tying themselves up in knots as to what 'Simplified' might do to their professionalism work, or pondering product regulation. Anything other than worrying about the millions who will go unserved, in what can only be an absolute catastrophe for the market and UK society.

So, good on you Aviva - I'd like to know more about what the FSA believe the industry should be doing for the millions who can't, or won't, pay for the new diamond-standard independent advice.

Aviva are barking up the wrong tree.

It is not the FSA which stifled Simplified Advice but the FOS and means testing.

The FOS continues to confirm they do not recognise the concept of simplified, basic or limited advice (see their Jan/Feb 2006 newsletter).

They will apply exactly the same criteria to simplified advice as to full advice.

Next consider the following fact: The research done by the FSA in 2004/5 showed basic advice provided via a decision tree or other simplified advice method is suitable only 80% of the time. (And that's before you consider the nightmare that is advising client who may potentially have any pension or investment savings means tested away from them in future years).

Finally, consider the fact the Financial Services Bill will facilitate class actions against firms.

Combine these fact and you have a situation where any business providing simplified/basic/limited advice is has a high probability of being fully liable for all losses up to £100k per claim on 20% of the business it writes.

You'd have to mad to even consider setting up a simplified advice service in a system so heavily rigged against firms.

I’ll not go into the irony of a socialist government being responsible for the mass exclusion of clients from advice in this way…

Research shows that most people actually would prefer simpler products. Providers should get off their fat behinds and start pulling together simpler, less risky 'savings' products if they want to do a better job of capturing the market that will not pay for financial advice.

The idea that we should, instead, change our legislation or education system to suit over complicated, uncustomer focused products and providers is deeply irriating.

If providers can't offer products that people find attractive, they shouldn't be in business. As it is, providers call any customer that has had a product over 5 years a 'legacy problem' because of all the confusion and dissapointment involved. It's not a sustainable business model.

Providers need to get a grip or get out of the way and people with 'real world' experience serve people with a savings and investment need.

Copy, I'm with you in that providers should be consider 'simpler' products - but that will be of no use if there's no viable market in which to sell them.

The RDR will force providers to change tack with their product sets - they will be needing to compete on more than commission, and that will require a better understanding of what it is customers need and value.

They'll likely value advice and reassurance; but they won't need the cost of full advice - not the mass and lower-end of the market, certainly.

So, how do you get that FSA? I'm not sure it's in a Simplified Advice regime that looks the same as full independent advice; and I think we, as an industry, run a massive risk of seeing people simply disengage when they find themselves without options.

I'm sure that thought is keeping many in the Treasury awake at night!

I don't think such products need necessarily be 'simple' under such a regime - I think the need for consumer education is clear, alongside an admission that some products are complex. We have a situation in which consumer responsibility is not clearly stressed; but it most certainly should be. Moneymadeclear may not be the whole answer, but it's at least a start - I'm more inclined to ask "ok, what's next?"

As for your contention that providers 'get out of the way' - are you saying IFAs will serve the entire market?

I think you might have missed the point on that one - there won't be enough; and many consumers won't pay. I think even the FSA are aware of that.

Hence providers and advisers (those who might wish to operate a Simplifed service alongside their other offerings) need to find another way - and the FSA needs to start engaging with us all to find it.

Without a clear statement from the FOS, it will remain financial suicide offering anything with the word advice in it unless we know how FOS "LAW" will interpret basic advice AFTER the advice has been given.

Hi Mr Ed,

When I say 'simpler products' I mean basic low risk savings products.

Anything as complicated as variable fixed rates mortages, which consumers (like me) can sort out on our own.

Research shows that people with only a certain level of income and low savings do not want risk.

However, if they have an opportunity to build up their savings, there's a high chance they'll want to invest some of it, ideally with a the help of a good quality IFA.

However, now it seems more profitable for providers to offer overly complicated products with high levels of risk and uncertainty because it suits their business model not to worry about the outcomes of their customers. Hence many consumers avoid financial services products.

In essence, financial services are only aimed at, and service, a top segment of the market. They have proven a bit crap at looking after everyone else, and other solutions need to be made avaialble to this market.

Ideally I would like to see pensions, for instance, including high interest deposit accounts, along with tax relief and employer contributions, this would cut out all the tcf nonsense and ridiculous quotes etc.

When folk decide they want better returns, and risk, they can speak to the professionals for advice.

It is very clear in these conversations that there are always people from varying backgrounds in the industry.

Some are not advisers and there is obvious conflict.

Others are advisers but not in their own businesses and make good comments but are unaware of the cost implications of the much of what is happening, ie the cost of the compensation scheme, FSA fees and PI.

Currently IFAs are writing much cleaner business than they have written for a long time.

The banking sector on the other hand are about to drag us back in to trouble yet again, when they were the main problem in the past.

So much so that excesses for EACH claim could be as high on average as £10k.

PI insurance per adviser may go up by as much as 25% next year, this is an early warning of what will then hit the compensation scheme, the compensation scheme costs roughly the same per adviser as PI insurance.

Tim has highlighted the average 'wrong advice' percentage rate of simplified advice being in the region of 20%.

The industry cannot continue to accept complaint levels currently provided by the banking sector as it is, never mind adding this potential level of claims.

It would be anyone's guess what level of cost could ensue, £20k excesses and £6k per adviser insurance??

Remember we are also potentially saddled with paying for half the free advice channel of the FSA too.

Before anyone of this can move on the FSA must:

1, Get rid of the high level of bank complaints once and for all.

2, Decide if it is going to relax any area of product sale, if it is then it has to bring in something else to ease the pressure on insurance, ie the long stop, or take financial responsibility for this sales area on to government and away from the rest of the industry in case it fails.

Under TCF there is no way that that clients paying for financial advice should fund any compensation failures of the FSA in an area of the industry which they were not involved in.

The FSA should respect its own judgements on clients in TCF.

Simplified advice?

We are going full circle and will be back to the beginning soon.

The beginning?

"What you need is a few wee endowments pet. A 10 year one for savings and a 20 year one for a pension. And of course an even longer one to cover your family against your death that we will do on a "life of another" basis because we haven't a clue about (and don't want to know about) trusts and how they could benefit you."

Let's cut to the chase. This industry has progressed from the "wee endowment, pet" syndrome.

It is a slap in the face to those excellent advisers who have taken the time and made the effort to be professional advisers to suggest that "simplified advice" is ok.

Generally (in my opinion) professional advisers have evolved despite constant criticism from all directions and they (i.e. YOU) are far better and more valuable than they even believe that they are.

Isn't it about time that the industry supported them (i.e. YOU) properly?

It is easy to see why insurance companies like Aviva, has elected to offer " simplfied advice", or "generic advice ", or a system of traffic lights for consumers to follow like lemons - but not engaging in good quality, or sound advice. For thos who wish they can pop into their bank where the counter staff - shout through their mega phones " that you've got a lot on money in yoru account !" . . ." would you like to speak to our fianncial adviser ?" . . failing which customers are forced to speak to these untrained incompetent employees, paid by high levels of commisions, just as I was all those years ago, a resutl ion the institutionalised and the " Industrial Industry ", which is Aviva, Scottish Widows Stanfdard Life, and now Friends provident who appear to have been gettign into bed with Tesco - to flog their products. Scottish Widows telephones our clients to offer their advice ! Recently Standard Life telephoed me to confirm they could offer premiums 30% or more cheaper . . .than going through an Independent Financial Adviser - as " a result of their commisions ". Perhaps the untrained unethical employees, following the TSB Bank and Co Operative Bank with selling strategies designed to pay high levels of commissions to them - rather than good quality sound advice from Financial Planning Professionals.

Ian Lees