FSA consider pure protection policies

Monday, September 27, 2010

The Financial Service Authority have released the conclusions of their recent discussions surrounding the sale of pure protection products. The findings by the group have been warmly received by specialists within the protection industry, as their rules on remuneration are shared with the industry.

The FSA have decreed that companies who sell pure protection under COBS guidelines, rather than ICOBS can continue their activities after the implementation of the recent Retail Distribution Review, without being forced to apply Adviser Charging guidelines to the sales.

The Conduct of Business Sourcebook (COBS) states that: "If firms wish to charge a single fee for their pure protection services and investment advice, then they are free to do so. The remuneration transparency proposals seek to help customers understand how their adviser is remunerated and the total remuneration received."

Previously, it was thought that the FSA would prevent firms operating under the COBS system to charge the single fee for services and advice. An IFA from CBK Colchester has commented on the recent decision: "Originally the FSA indicated that they would not allow this, which would have been a pain. It would have been a nonsense to work under two regimes with the same client at the same time in order to claim commission from the protection aspect. As for the remuneration transparency rules; perfect. Why wouldn't we be transparent anyway?"

Another spokesperson, Alan Lakey, who holds a principal position at Highclere Financial Services, has added his comments to the debate in support of the FSA’s decision, stating:
"This makes sense, the FSA did what I hoped for. However, there is the proviso that this is part of an overall strategy that does not make sense. There is still no logic in having the investment part of an IFA's business under the RDR and the protection part not. The FSA are still making a pig’s ear of the RDR."