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The Actuary The magazine of the Institute & Faculty of Actuaries

Letters: Roy B. Colbran

How could our profession ignore the questions of charges and commission-driven sales when responding to the Financial Services Authority’s review of retail distribution? The FSA’s discussion paper sets out to achieve a fair deal from the financial services industry and clearly describes the problems in the way. Prominence is given to complex charging structures, remuneration-driven sales by so-called advisers and the fact that those giving advice can do so with little training and testing.
The Profession’s response claims to focus specifically on the potential impact on consumers. However, it makes no reference to the above issues and concentrates on the need for event-driven advice, saying that the regulated advice model centres around looking at all areas of financial need. The present set-up, it says, is a counsel of perfection often unavailable or unaffordable.
These are, indeed, valid points but was there really nothing the Profession could say about the commission-led system that pushes people into high-charging products, when true independent advice would send them in a very different direction? Once clients get into the hands of an IFA or provider-salesman, they are unlikely to be pointed towards a non-commission-paying product such as National Savings, a cash ISA or an investment trust. Instead they find themselves in such things as unit trusts whose typical charges reduce the accumulated fund by 30% over a 20-year period.
To conclude on a happier note, readers will find more robust submissions to both the Retail Distribution Review and the Thoresen Review on the website of the UK Shareholders’ Association www.uksa.org.uk with positive suggestions to address these issues. At which point I must confess to having played a significant role in the drafting of those responses!
Roy B. Colbran
13 January 2008

The editorial team welcomes readers’ letters but reserves the right to edit them for publication. Please e-mail letters@the-actuary.org.uk