The FSA says it will consult with stakeholders on the issue in the coming months and publish feedback in its June consultation but warns doing so could create more problems than it solves.
In yesterday’s feedback statement FS 08/6, the FSA said it will only extend RDR disclosure requirements to the group market where firms are actually advising employees.
The RDR seeks to improve the clarity for consumers of the characteristics of different service types and the distinctions between them, raise professional standards, reduce the conflicts of interest inherent in remuneration practices and improve transparency of the cost of all advisory services.
The project proposes requiring any adviser that wants to describe itself as independent as having to disclose the way it is remunerated at the outset of meetings with clients. The concept of Customer Agreed Remuneration has been relabeled Adviser Charging under the latest feedback statement.
The FSA says: “The GPP market is somewhat different to other investment product markets, so it may necessitate a different approach. For example, while advice on GPP schemes is frequently provided to an employer, it is quite common for employees to choose whether or not to join their firm’s GPP without getting advice.
“We have received feedback suggesting that we should consider a role for employers (which may entail legislative changes) because advice given to employers about GPPs is not generally subject to our regulation.
“We could only consider requiring Adviser Charging in circumstances where firms advise employees – and this creates two conflicting challenges. On the one hand, there is a risk that we could inadvertently incentivise firms to stop offering advice to employees at all if we did apply the new requirements to GPPs; on the other hand there is a risk that firms could be incentivised to set up GPPs for customers that would previously have been advised to take out individual policies, if we exempt GPPs from any new rules. In the coming months we will explore the scope for applying Adviser Charging in the GPP market, keeping in mind that doing so could bring new problems as well as benefits.”