UK consumers demand choice

Consumers in the UK demand choice when it comes to insurance
products, reveals a survey conducted by not-for-profit trade body
the Association of Independent Financial Advisers (AIFA). According
to the AIFA, 96 percent of respondents said they expected an
independent financial adviser (IFA) to be able to select a product
from the whole of the market, while only 4 percent would expect to
be offered a product from a shortlist of companies.

The survey was conducted by the AIFA as part of its response to
the Retail Distribution Review (RDR) published by the Financial
Services Authority (FSA) in June 2007. One of the more
controversial proposals made by the FSA in the RDR would entail
creating two levels of financial advisers. One would provide advice
based on the full spectrum of products available and the other
would offer advice based on a limited range of simple products. The
first category of advisers would be required to have a high level
of appropriate qualifications, while a more basic level of
qualifications would suffice in the second category.

Against this background, the AIFA’s director general Chris Cummings
commented: “Our research confirms what the Financial Services
Authority already know – consumers associate independence with
whole of market. The RDR proposals that threatened to remove this
link look like disappearing into the long grass.”

Findings of the AIFA’s study also ran counter to another key
recommendation made in the RDR – that there should be a move away
from commission-based remuneration of IFAs to one based on
customer-agreed remuneration. According to the AIFA, 46 percent of
respondents want to have a choice over how they pay for advice
while one-third believe IFAs should be paid through commission.
Only 7 percent of all respondents were in favour of an upfront fee
and 15 percent in favour of customer-agreed remuneration. Notably,
the AIFA found that among lower-income households – those with an
annual income of less than £25,000 ($50,000) – 44 percent prefer
commission. These findings confirmed that a wholesale ban on
commission would discourage a large number of people from seeking
professional advice, stressed Cummings.

The AIFA’s survey also provided insight into consumer attitudes
towards advice. Eighty-eight percent of respondents said they are
ultimately responsible for their own financial affairs, 6.7 percent
said it was the role of their financial adviser, 4 percent said
family and friends, and 1.3 percent said government.