RegulationMay 1 2018

Aegon asks FCA to create anti-poaching device

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Aegon asks FCA to create anti-poaching device

In a move that will surprise many advisers, the pension provider has said that if the FCA wants providers to take action when a customer appears not to have a financial adviser, a system must be in place to ensure that is in fact the case.

Aegon made the remarks in its response to the watchdog's consultation paper on effective competition in non-workplace pensions - covering everything from individual private pensions to self-invested personal pension schemes - which was launched in February and closed last Friday (27 April).

The pension provider argued one of the main causes for concern in this market is  individuals who haven’t received financial advice.

Speaking to FTAdviser about the submission, Steven Cameron, pensions director at Aegon, said advisers "are a key driver of competition on behalf of their customers and where an adviser had recommended a non-workplace pension, it is more likely to offer value for money for the customer"

In light of this, he added, it is possible “the FCA may consider remedies which place more responsibility on providers to make changes, if the client is not being advised”.

He said: “This may be simple to identify if the client has never received advice, but as the FCA says, some individuals receive initial advice but not ongoing advice, because they have agreed upfront that they did not need or don’t want to pay for it.

“In other cases, the adviser may no longer be active,” he said, leaving the client what is commonly termed 'orphaned'.

Due to this, Mr Cameron argued that “identifying whether a client is truly ‘orphaned’ needs to be treated carefully”.

He said: “If the FCA were to expect providers to take action, it’s important to build in a mechanism for checking first if the original adviser wishes to be involved.”

Such a mechanism could end years of disputes between advisers and providers over their relationships with the individuals who use each of their services.

Providers, including Aegon and rival Prudential, have faced a number of claims from financial advisers of attempting to cut them out of the process by going to the client direct.

Advisers claim this is can be an attempt by providers to stop paying trail commission due to advisers, or to allow them to sell more easily to the customer direct without professional guidance, and to lower the chance of a customer switching to another provider to get a better deal.

Paolo Standerwick, managing director at London-based MLP Wealth Management, who has previously accused Aegon of poaching his clients, argued all providers are able to identify if a customer has an adviser, because that information is on their records.

He said he isn't confident about Aegon's proposal.

"What they do and what they say is two different things.

"For the orphaned clients that need advice, providers should be distributing them among IFAs in that particular region. They should be lobbying the FCA to do this."

The regulator’s goal with the non-workplace pensions consultation is to find out if providers are competing on charges and if there are barriers to consumers identifying, and choosing, from more competitive products.

The FCA said it was concerned informal defaults may be operating in the market for non-workplace pensions that are not subject to the same protection as defaults in workplace pensions.

Royal London is another provider which also responded to the FCA consultation.

Sir Steve Webb, director of policy at the provider, and former pensions minister, suggested that the regulator should first to find competition solutions to problems rather than regulatory ones.

He said: “For example, if it is the case that there are people with non-workplace pensions that they bought years ago and which are no longer good value, regulators should see if savers can be prompted to shop around for better value options, rather than applying blanket regulation.

“In particular, the paper makes almost no reference to the pensions dashboard which could be key to re-engaging people with lost pots, legacy pots etc.”

Sir Steve also warned that the non-workplace pensions market is hugely diverse – Royal London alone has dozens of different legacy products – and therefore it is unlikely that a one-size fits all solution would work.

He also suggested duplication of governance needs to be avoided.

He said: “For example, some of these products are ‘with profits’ and therefore already benefit from having a ‘with profits committee’ overseeing them.

“Similarly, some individual pensions were previously workplace group pensions and therefore benefit from [independent governance committee] IGC oversight.”

Finally, if competition solutions cannot be found for the sector problems, Royal London supports “targeted interventions by IGCs to ensure that consumers are getting best value,” he concluded.

maria.espadinha@ft.com