Aegon has clashed with the True and Fair Campaign on whether the Markets in Financial Instruments Directive, when implemented by the Financial Conduct Authority, should include pension products alongside general investment.
Mifid II is EU regulation which aims to reinforce investor protection standards across the continent and must be implemented by the UK regulator. In doing so, it has policy choices to make, including the possibility of extending them to a wider set of products, and in March published a consultation paper on the subject.
Currently Mifid II includes equities, bonds, derivatives, structured products and Ucits, but not pensions and insurance-based investments like self-invested personal pensions and their associated wrappers.
Aegon UK urged the FCA in its response not to bring pensions into scope, arguing that domestic regulations already offer unique protections for UK pension savers and adding that, with an EU membership referendum now certain, now is not the time to be “gold plating” EU rules.
Steven Cameron, Aegon regulatory strategy director, said that in his opinion, consumers do not need more layers of regulation, even if that means there is not full consistency between Mifid and non-Mifid products.
“We would be particularly concerned if the FCA applied the concept of complex products to pensions. This could mean consumers might not be able to join certain pension schemes or invest in certain funds deemed complex unless they received advice or had been through an appropriateness test to assess their knowledge and understanding.
“This could create huge problems if any default funds used for auto-enrolment were classed as complex, perhaps because their investments allowed the use of derivatives.”
However, the True and Fair Campaign’s response urged the FCA to ensure a consistent regulatory regime between insurance-based investment and pension products, stating that consistency is therefore vital to afford savers the ability to make like-for-like comparisons.
“Any inequality of regulation will allow companies to ‘game’ the regulation by artificially ensuring their products come within whichever region has the lightest regulation and poorest consumer protection,” read their statement.
Gina Miller, founder of the transparency campaign group, said she was aware of several associations and companies have been “hysterical” in their responses to the consultation in term of the supposed astronomical costs, lack of available data and the limiting on their ability to “flog” funds if they are made to comply with Mifid II.
“Many of their objections are grossly exaggerated and simply amount to feet dragging in order to defend their inflated profit margins, above the interest of their clients. The FCA should be rigorous in applying consistency, and ensuring a level playing field across all products and all companies.”
She also took aim at the question of the Mifid II’s standard of independent advice versus the UK’s Retail Distribution Review standard, stating that there is a difference in terms of allowing an adviser to be independent if they are a specialist in one product area of activity rather than the RDR standard, which requires an independent adviser to have knowledge of all product areas.
“In practice it is highly doubtful that many advisers are genuinely whole of market, as evidenced by their continued overwhelming concentration on mutual funds rather than the various alternatives available,” the response read.
Yesterday, the Wealth Management Association called on the FCA to scrap the “failed” RDR definition of independent advice, arguing it should be replaced with provisions in the Mifid II legislation.
At the end of last year, David Geale, the FCA’s head of policy, told FTAdviser that a consultation into advice labels may see such independent and restricted being ditched in favour of a more qualitative approach, looking at how services are described to consumers.
peter.walker@ft.com
