April saw the publication of two reports - the FSA’s interim feedback on the Retail Distribution Review and Lord Hunt’s review of the Financial Ombudsman Service.

RDR 

Many respondents to the RDR called for a ‘simpler’ landscape, with a clear distinction between advice and sales, with the FSA suggesting three components - advice, sales and money guidance.

The General Financial Adviser category has been jettisoned, raising the prospect of tied and multi tied advisers having to choose between the advice and sales categories.

Advice could only be given by independent advisers, who would have to reach minimum professional standards and advise on a ‘whole of market’ basis. Remuneration would have to be agreed with the client, and not influenced in any way by the provider.

Salesmen would have to conduct business on a ‘non advised’ basis, although they would still have to operate within the current regulatory framework.

Money guidance is a newly proposed information and guidance service along the lines proposed by the Thoresen Review, which the FSA is taking forward as a ‘Pathfinder’ project to see how this service might develop as a national service.

The BBA attacked the proposals because they would limit the service they currently operate for the mass market and would present consumers with a stark choice between expensive financial advice or a non advised sale.

The FSA acknowledged that it needed to do more work in this area, saying it was in discussions with banks about allowing them to continue to offer advice on their own products.

Edinburgh declaration

Meanwhile, the Chartered Insurance Institute, the Institute of Financial Planning, the Securities & Investment Institute and Chartered Institute of Bankers in Scotland signed a joint declaration of principles setting out how they will supervise advisers in the future.

They called for a single independent professional standards board to create, oversee and develop high standards, with the power to expel advisers from the industry.

Review of FOS

The Hunt review of the Financial Ombudsman Service called for a crackdown on claims-chasers, including a fee for vexatious claims and moves to force them to use more transparent advertising.

The review also called for FOS decision letters to contain the proposed amount of compensation rather than a formula, and for the worst performers in terms of uphold rates to be named and shamed.

But he rejected calls for consumers to have to pay a fee, suggesting that a higher fee should apply to enforced ‘deadlock’ cases and differential pricing for ‘assessment’ and ‘investigation’ cases.

Personal accounts

On the personal accounts front, the European Commission informally agreed that employees can be auto-enrolled into GPPs when personal accounts are introduced in 2012.

Standard Life is lobbying the House of Lords to pressurise the Government to change the exemption test for personal accounts and to look at a dual earnings model using band earnings and basic earnings. (TheGovernment wants the exemption test for personal accounts to be based on total band earnings).

Meanwhile the Personal Accounts Delivery Authority (PADA) came in for criticism for spending £830,000 a month on consultants and £6.7m between August and March 2008.

There were sharply differing views on how people should be charged for personal accounts, with the ABI and NAPF both opting for an annual management charge plus a contribution charge, whereas the IMA and the AIC favoured an AMC only.

Wraps

Elsewhere, the FSA warned it was concerned about potential for conflicts of interest, extra consumer costs and inappropriate advice when using wrap platforms.

In its feedback statement to last summer’s platform discussion paper, the FSA pledged to visit a number of adviser firms of all sizes to ensure they are using platforms appropriately.

Many advisers were not treating customers fairly, if they failed to manage potential conflicts of interest, such as where the adviser holds shares in a platform.

Resolution

Meanwhile, the near-£5bn sale of Resolution to Hugh Osmond’s Pearl Group neared completion, opening the way for Royal London to acquire some of Resolution’s assets from Pearl for £1.2bn.