AXA has said a Financial Services Authority (FSA) letter it has received clarifying the regulator's stance on provider-facilitated adviser charging on variable annuity products shows its method to be retail distribution review (RDR)-compliant.
In a letter seen by New Model Adviser® the regulator states that providers advertising the overall figure of a guarantee under variable annuity products inclusive of an adviser charge before it is deducted could 'mislead' consumers.
The letter, which is dated 12 December 2012, said it would be more appropriate to base the guarantee on the amount invested after adviser charges have been facilitated.
AXA said its products were promoted in this way and the FSA letter was confirming that it was RDR-compliant.
'AXA Life Europe asked the FSA for clarity on how adviser charging should be treated in this post-RDR environment and in particular whether the guaranteed benefit levels could be calculated without having regard to the amount of adviser charges facilitated,' said a spokeswoman. 'On the basis of this guidance, AXA Life Europe launched a new version of Secure Advantage on 31 December 2012, which is compliant with both the spirit and the letter of the RDR framework and the guidance issued by the FSA.'
The FSA letter said: 'A situation where guarantees offered to consumers are not varied despite the level of adviser chargers facilitated through the product varying (because the guarantee is based on the total amount invested rather than the amount invested after adviser charges are facilitated), would mean that the guarantee would be worth more to the customers facilitating higher adviser charges (within the limits) than those facilitating lower adviser charges.'
The regulator also said it was concerned that by offering higher guaranteed benefits to those who chose to facilitate higher amounts through the product, an insurer would not be treating customers fairly, particularly for customers who choose to pay the adviser directly.
‘This raises concerns about the extent to which consumers would be able to understand the value of what they are being offered,’ it said.