Two years ago Sir Callum McCarthy, the FSA chairman, challenged the financial services industry to find a better way of providing advice and selling its products. He was particularly concerned that commission paid to advisers could undermine the independence of advice.

Our industry welcomed the challenge. It had seen the problems, but no company could risk market share by being the first to end the commission model. However, the product providers, insurers and banks have now agreed the best way forward and today the ABI will submit its proposals to the FSA. The proposals put consumer interests first, are a tribute to Sir Callum’s vision in stimulating the debate and will be an important legacy to his successor, Lord Turner of Ecchinswell, who will need every spare minute to concentrate on other matters.

Our goal is to raise trust among consumers so that they feel more confident about saving. Achieving easier access to good, reliable advice is central to this, given the need to enhance financial capability and understanding in the UK.

To achieve these goals we advocate four fundamental reforms. First, we need to strengthen professional qualifications. All advisers who provide product recommendations to clients should attain either the Chartered Insurance Institute (CII) diploma, or an equivalent qualification – in educational terms, this is the same as the first year of an English undergraduate degree. We would expect advisers to desire and obtain higher qualifications – this will improve customer confidence and give individual IFAs greater scope to compete for business.

Second, a professional standards board for advisers should be established, to ensure that skill levels and ethical standards are maintained. The board should oversee existing professional training organisations, such as the CII and the ifs School of Finance.

Third, the cost of providing advice, and, therefore, the remuneration of advisers, should be discussed and agreed between IFAs and their clients, with no input from the product provider. The charge may either be paid in one single lump sum or be spread over time to make it more affordable. The most important aspect of this change is that product providers will no longer set the level of remuneration paid to IFAs for providing advice on their products.

Finally, tied advisers (those who are employed directly by, or linked only to, a single company) should, like IFAs, be able to provide advice and make sales recommendations. In doing so, their status and the cost of the advice they are giving must be clear to the consumer.

New, faster options to help consumers to understand their needs and the products to meet them, and to let them buy those products, would help to improve consumers’ experience of our industry. The market needs sufficient breadth and depth to deliver products to existing customers and to those who do not at present have easy access to financial services.

Our vision for the future is to create an environment in which that access is widened for everyone. Much has been done; now, more hard work is needed to ensure that our desire to improve outcomes for consumers really delivers results.

— Stephen Haddrill is director-general of the Association of British Insurers

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