Product category:
General insurance
News Release from: Fidelity International | Subject: Investment
Edited by the Insidemoneytalk Editorial
Team on 29 June 2007
Fidelity responds to the FSA's Retail
Distribution Review
Of the FSA's Retail Distribution Review, Richard Wastcoat, UK Managing Director, Fidelity International said:
"The aims of the Financial Services Authority are laudable but our concern is that this paper may have the opposite effect of that intended, leading to further dilution of the independent label and greater confusion for consumers" "As it stands, the paper is wide open to abuse because it contains so many loopholes and fudges"
This article was originally published on Insidemoneytalk on 15 Feb 2007 at 8.00am (UK)
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"Take the Customer Agreement Remuneration (CAR) proposal: this calls for the adviser and the client to agree the cost of advice, though this fee can be a traditional commission".
"By allowing advisers to call this a fee, they can claim the title of independent - provided they have the required qualifications".
"This will do little to end product bias".
"The proposed introduction of Primary Advice will also enable advisers using the CAR system to jettison the requirement to scour the whole market for the most suitable product and sell just a limited range of investments".
"In short, if the contents of this paper were implemented today, advisers could receive higher remuneration, based on a narrower product set and still call themselves independent".
"That would be a retrograde step".
""Primary Advice also requires what the FSA describes as "simple" products, but its approach looks overly simplistic and could open the door to mis-selling.
An index fund is simple to explain but that does not make it low-risk.
Under the criteria outlined in this paper for simple products, with-profits bonds would qualify.
Even the FSA's own example -guaranteed equity bonds- have been controversial.
The paper appears to give the game away when it says: although primary advice might not always lead to the most suitable product recommendation, it should lead to consumers purchasing a product that would provide more benefit than if they had not made any purchase at all".
""For all these reasons, it is vital that there is a vigorous debate about these proposals during the consultation period." Fidelity International Limited ("FIL") and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US.
The FIL Organisation manages a total of ?143.0 billion of assets10.
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