RDR option will affect broker protection sales
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The Financial Services Authority has included an option in its Retail Distribution Review that would hit brokers’ protection sales.
In an RDR consultation paper on pure protection sales published last week, the FSA proposes that any firm with regulatory permissions for investment advice would have to disclose commission on all their pure protection sales. But the regulator has admitted that this may have a negative impact on some brokers.
The consultation paper states that for a firm with both investment advisers and mortgage brokers who do not give investment advice, the latter would be obliged to disclose commission on any pure protection sale because the rule applies to the firm and not individual advisers.
An FSA spokeswoman has confirmed that this would apply to networks with both mortgage and investment advisers.
Ian Smart, head of product development and technical support at Bright Grey, says he hopes the FSA doesn’t go down this route.
He says: “My hope is this doesn’t go forward because of the uneven playing field it would create. It does not seem right to base disclosure on investment permissions when these permissions are not being used.”
But Dev Malle, group sales director at Personal Touch Financial Services, says: “I don’t think this should impact firms that have a robust sales process and are happy to disclose commission to clients.”
The FSA says the option of disclosing commission according to firms’ permissions may be preferable to one where particular transactions would be identified for commission disclosure.
It is also going to review the sales standards of pure protection products by brokers over concerns that they have moved into product areas where they have little experience.
