Adviser warns over non-advised commission incentive
Uninformed consumers could be misled into thinking non-regulated services are a free alternative to advice.
A specialist annuities advice firm has raised concern that some clients may be inappropriately pushed into non-advised offerings post-2012 as some firms seek to promote services that continue to provide commission at a time when education over the benefits of regulated advice is lacking.
Three-tier advice firm Annuity Direct has said it will be stepping up client communication to draw a clearer distinction between regulated and non-regulated advice post-Retail Distribution Review, due to concerns that consumers will not know the difference themselves.
The retirement income specialist currently offers three distinct levels of service: execution-only, non-regulated and regulated.
When the commission ban comes into effect post-RDR, some speculate that lower-value clients will be shunted into non-regulated or execution-only services for products such as annuities.
Alan Higham, chairman of Annuity Direct, is concerned that some advisers could over-emphasise non-regulated business after RDR as commission can still be paid on sales resulting from such business.
In the worst-case scenario, uninformed consumers could be tempted into non-regulated service by companies marketing themselves as a free alternative to regulated advice.
He said: “We just like customers to make their own choice so we have three levels of service. If you say you want this exact annuity at the best price we will give you a quote, but we don’t get a lot of people saying that. Most people say they think they know what they want but need some help.”
In an interview with FTAdviser, Mr Higham warns that the Financial Conduct Authority could decide to “rewrite history” if it suspects non-regulated advice is hurting consumers in the wake of the Retail Distribution Review.
He warns that although the regulator has been relatively easy on non-regulated advice, this could change if those regulatory freedoms increase the risk of consumer detriment.
The full interview with Mr Higham, part of FTAdviser’s ongoing series looking at advisers’ RDR readiness, will be published later today.