We welcome FCA making its position clear on funding from Providers as we believe this has the capacity to help create a more level playing field in the market between both Providers and Intermediaries.
However, we believe that the examples of good and bad practices are likely to lead to a reduction in providers contributing to the advancement and education of advisors and will ultimately lead to an increase in costs to the consumer.
The key issue that the FCA are attempting to address is the inappropriate conflicts of interest that could lead to poor advice or detriment to consumers and although we believe there are plenty of examples in the past where this has been the case where large amounts of monies have been involved, the consultation findings are restricting genuine commercial deals that can clearly have benefit across the industry.
Alexander House Financial Services Ltd. (AHFS) has stated often that it is a completely transparent company and long before this review was completed had made it clear internally and externally that we would only accept support providers if we were prepared to clearly disclose this on our website for all of our customers to see. We do, however believe strongly that there is a helpful and non-conflicted position that providers could take.
- As a general position, it should be perfectly acceptable for providers to budget for marketing their products to advisors and consumers. Also levels of support for distributors should be welcomed as a way of reducing costs that would otherwise have to be passed onto consumers, where this is not a conflict and doesn’t lead to excessive charging at the provider product side.
- It should be acceptable for distributors to agree commercial terms with providers where they have decided to be restricted and have chosen to align themselves with a small panel of providers. This would be the case in a single tie. Although we would accept that this is not the same as being independent and choosing to work with a panel of researched products ad providers with a view to promoting them as best of breed.
- It should be acceptable for providers to contribute towards the cost of training and informing advisors about their products and sharing the cost of these events. We agree it is not acceptable for this to be profit-making for the distributor.
- It should be acceptable for a distributor to sell marketing space to access their advisors and consumers at reasonable market advertising rates- this would be acceptable for any other commercial supplier.
- It should be acceptable for providers to pay for intelligence on complaints, customer trends and distributor requirements at reasonable market consultancy rates. Distributors do not get the same benefit for meeting providers.
- It should be acceptable to see MI data to providers for reasonable market rates, this practice is universal across all industries and it is unfair to restrict the key people who would want to buy this data.
- Providers should be able to provide any technical training material, training systems, planning tools etc that improve performance and quality of advice given to consumers. This should be limited to actual training materials and cost of technology provision.
Alexander House Financial Services Ltd. (AHFS) agree with the findings that it is not acceptable for any of these payments to be excessive, have impact on distributor in such a way that is takes over as primary source of revenue or can be seen to conflict the firm. We would suggest overall funding not exceeding 9.9% of a firms gross turnover from regulated sales. Taking this approach would create a level playing field for smaller players in the market.
Providers should provide support across the industry equally and maybe it should be agreed an appropriate level per advisor for each element as a benchmark, rather than the fear of recrimination to override a reasonable desire to have their products sold by experienced, knowledgeable advisors and to obtain up to date customer data to allow appropriate product design and target customer improvements. This has the capacity to strengthen all forms in the market without increasing costs to consumers.
- We do believe Provider support has a part to play in assisting Distribution business to achieve their goal through a fair contribution process to advisor training and development, which benefits not only the advisor, but their firm, the consumer and ultimately the Provider as a result of better quality business being written.
- We believe this can only be achieved by clearly showing in the public domain contributions that Providers have made to intermediary businesses and what the contribution was for.
- There is no detriment in Intermediary firms making a fair profit on any such funding as long as long as that is conflict free.
We absolutely accept that any funding not operating on such a basis is likely to give rise to undue influence over the Distributor and we remain keen for FCA to take appropriate action where this is determined to be the case. We believe this should also be the approach adopted with Support Services providers.
Alexander House Financial Services Ltd. - Oct 2013