Unintended Consequences of Regulation

We received a copy letter today for a life assurance policy which was set up by a previous adviser on automatic indexation.

Included with the copy letter to the client was a form for the adviser to sign.  It asks us to declare whether or not we have provided advice to the plan holder.

It included the following statement:

If you do not return this form to us… we will assume that you have not given advice and we will pay any commission due.

So let’s get this straight.  If we had provided advice to the client, commission must cease.  If we have not provided advice, commission may continue.

Still confused?  As a consequence of the FSA’s RDR initiative, we are paid if we do not to give advice.

As a result of the FSA’s RDR initiative, we will be penalised financially if we do give advice.

It’s small change, and won’t change how we do anything. But the concept, the idea, just think about the idea. A regulatory setting up a system to financially motivate advisers to, at best, avoid talking to a client.

No one set out for this to happen. The FSA are not actually trying to make things worse. They want to do the right thing, they want to protect customers and reduce costs. And yet their intervention has, in this instance, done exactly the opposite.

I wonder what this might tell us about the fund manager rebate situation….

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2 thoughts on “Unintended Consequences of Regulation

  • Chris

    We had a very similar case on a pension. If we top up the pension on a non advised basis we get paid by the provider; however if it advised (which it is) then we don’t get paid anything.

    What implication does this have on the charges for the client?

    None: We don’t get paid, the client still pays the same amount, but provider saves money!!

    We therefore have to charge the client a fee for our advice.

    Only one winner as far as I can see!!!!

    Reply
  • Chris

    We had a very similar case on a pension. If we top up the pension on a non advised basis we get paid by the provider; however if it advised (which it is) then we don’t get paid anything.

    What implication does this have on the charges for the client?

    None: We don’t get paid, the client still pays the same amount, but provider saves money!!

    We therefore have to charge the client a fee for our advice.

    Only one winner as far as I can see!!!!

    Reply

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