In a draft response to the FSA's retail distribution review, obtained by Money Marketing, the ABI calls for FSA regulation to stop product providers from paying commission to IFAs or multi-ties for the provision of advice about investment products.
It also demands a large increase in capital adequacy requirements for advisers, a new light-touch regulatory regime for providers' direct salesforces and for single-tied advisers to retain the ability to receive current commission incentives.
It suggests IFAs or multi-ties be governed by a system which it has branded Caris - Customer Agreed Remuneration for Intermediary Services - similar to the factory-gate pricing model already used by some providers.
The provider would set the product price to reflect its costs, with intermediaries add-ing their own costs separately. The consumer would pay by up-front fee or staggered over time using their investment pot. The system would be restricted to new business and would be phased in.
Alongside Caris, there would be a 'Savings and Investment Sales Channel' with little regulatory scrutiny and no suitability test, which the ABI hopes would make large-scale direct salesforces economic again.
Consumers would retain the right to cancel trail commission on future contracts and redirect them into their policies if they were not being offered ongoing service.
The paper also slams the recently proposed reforms to the Financial Services Compensation Scheme and blames advisers for leaving misselling liabilities behind for others to pay for. It attacks some advisers over qualifications, suggesting 'there is a suspicion that others continue to try and operate underneath the regulatory radar'.
SimplyBiz chairman Ken Davy says: 'These proposals appear to be a cynical attempt to change the marketplace for their own advantage and detriment of consumer choice.
'Insurance companies have learnt nothing from the disasters of the past, created by their desire for profit and control of distribution. IFA distribution remains by far the best for consumers and regulator.'
Syndaxi Financial Planning managing director Robert Reid says: 'This is further evidence that the ABI is totally out of touch.'
ABI assistant director of distribution reform Alex Roy says: 'This draft is a long way from our final proposal, which itself will be a starting point for industry discussion. There needs to be a proper market assessment, after June, of any proposals.'
Source: Money Marketing, Paul McMillan 26/04/07