The Financial Services Consumer Panel today published its response to the FSA's Retail Distribution Review Discussion Paper. Whilst welcoming the review as important and timely and applauding the FSA for undertaking the review, the Panel believes the model proposed in the Discussion Paper is over complicated and potentially confusing to consumers. The Panel has therefore outlined a simpler model of its own. The Panel would prefer to see just three categories of people able to discuss financial products with consumers. They would be divided very clearly between those able to provide impartial advice and those who sell.

In its response the Panel says:

• A consumer focused model for the purchase of financial products is needed which is intuitive and simple. The Discussion Paper's proposed model does not meet these criteria.
• Our preferred model is for a simple three tier market place of generic financial advisors, independent financial advisors and sales staff who would be described as such.
• 'Independent' must mean advice is fee only and based on a whole-of-market service.
• Customer Agreed Remuneration could provide a viable alternative to fees paid up front.
• Generic Advisers will be important, both to recommend product types upon which Independent Financial Advisors can give focused advice; and to issue portable fact finds, to be used by Independent Financial Advisors or sales staff.
• Primary advice, as defined in the FSA's Discussion Paper, is not appropriate.
• The system of professional financial qualifications should be simplified so that consumers can understand it and qualification standards should be increased over time.
• We believe that these changes should be mirrored in the mortgage and insurance markets.

John Howard, Chairman of the Financial Services Consumer Panel said:

"The Northern Rock ‘crisis’ may have stolen the headlines, but few if any consumers have lost money as a result of it. However each year thousands of consumers fall prey to a system of financial advice responsible for the endowment scandal, pensions misselling and split caps. That’s why the FSA's retail distribution review is so important to consumers. Developing a new system of providing financial advice could be the most significant development in financial services regulation since the FSA was created. The FSA has clearly recognised the problems, now it needs the courage to carry forward radical changes – the Discussion Paper has made a start but the FSA must recognise we need a system that makes sense to consumers as well as to the industry."

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