Aviva has responded to the Financial Services Authority’s Consultation Paper on the Retail Distribution Review (RDR). Following extensive research among consumers and advisers, it supports efforts to improve the quality and transparency of financial advice but adds that these changes must ensure wider consumer access to financial services.
Of the FSA’s proposals, Aviva supports:
- Adviser charging for full and focussed advice. Aviva believes separating the costs of advice and costs of a product will have long-term benefits for customers, advisers and providers.
- Higher qualifications for advisers and the introduction of QCF Level 4 as the minimum standard for providing financial advice
- The 2012 implementation timetable – as long as its impact with the introduction of Personal Accounts and capital adequacy are analysed.
But Aviva is challenging proposals to:
- Ban provider factoring on regular premium products*. This would damage the savings market as customers would be unwilling or unable to pay for disproportionately large advice charges. Provider factoring should be maintained but subject to standard discount rates.
- Retain basic advice and develop streamlined advice. New ways are needed to enable consumers to engage with the industry as these proposals will be uneconomic for firms to operate.
- Require providers to monitor “extreme” adviser charges. This contradicts the aim of adviser charging, breaking the relationship between provider and advisers regarding payment. Providers are not best placed to police this and it instead should be monitored by the FSA.
David Barral, marketing director at Aviva, said: “The RDR is an excellent opportunity to transform financial advice and deliver a more sustainable and customer-focussed market. Aviva has consulted a large number of advisers and consumers and supports the aims of the RDR to create a market that delivers better quality advice and greater transparency of charges for customers. We understand that the RDR will mean big changes in the way advisers work and Aviva is doing all it can to help them. For example, the Aviva Financial Adviser Academy is playing a leading role in helping advisers attain the higher qualifications they will need.
“Improving the quality of advice will raise the cost of providing that advice. Aviva research indicates it is likely that large numbers of advisers will leave the industry while those who remain are likely to adopt business models to service fewer and wealthier clients. These changes could make it more difficult for middle Britain to get financial advice, so Aviva has launched the Future Adviser programme to find the next generation of financial advisers.
“Aviva recognises that access to good financial advice is crucial to the financial wellbeing of millions of people. Consumer access to financial products and services is the biggest and most pressing issue facing our industry and it is crucial that the FSA delivers on its objective of ensuring that advice is easily accessible.”
* Factoring is often referred to as indemnity commission. It is a system where an adviser receives payment upfront rather than being paid over several years.