New research from Zurich that examines the potential impact of the Retail Distribution Review on the advisor community has revealed that the majority of advisers would welcome the introduction of Customer Agreed Remuneration (CAR).
Just under two thirds of advisers (62%) said they would adopt CAR, provided it included commission offsetting, and provided financial incentives such as reduced regulatory fees were offered in return.
The research also shows that commission remains a popular choice for adviser remuneration. Seven out of ten (70%) of advisers indicated that a combination of initial and trail commission would be their ideal choice of remuneration, whereas less than a fifth of advisers (14%) said they would adopt a fee only business model.
Advisers were split over whether they would be prepared to study for further professional qualifications. Nearly half of those surveyed (46%) said they were not prepared to study further to obtain chartered status in order to avoid paying more for professional liability insurance, however just over a quarter of advisers (27% ) said they would simply pay a higher rate of insurance to remain in the industry.
Whilst the overall results of the survey were positive, it seems not all advisers said they were prepared to adopt the principles of the RDR, with one in ten of advisers (11%) saying they would leave the industry rather than embrace the proposed new standards.
Commenting on the research, Chris Gillies, Zurich Intermediary Group’s Managing Director said: “We support the FSA’s desire to encourage higher standards of training and professionalism; we have recommended a long transition period (six years) until the higher standards become mandatory, with positive incentives, such as reduced regulatory fees for those who achieve the new standards more quickly.. This will be important to ensure that experienced financial advisers do not leave the industry, but have sufficient time to make the transition and can see clear business benefits from doing so.”
The research also examined the impact of the RDR on attracting new entrants into the industry. Zurich’s analysis shows that over eight out of ten advisers (85%) believe the proposed changes will make it harder to attract new advisers in to the industry whilst less than one in ten (2%) think the proposals will make it easier.
Continues Gillies, “We consider that the challenge for the future lies in attracting new talent into the industry to ensure sufficient availability of good quality financial advice.”
The findings also reveal that advisers believe the proposed changes will have a detrimental effect on customers. Zurich’s research revealed that over 86% of advisers believe the proposals will make it more confusing to the customer.
Concludes Gillies, “Both insurers and advisors want to provide excellent advice and service to the end customer, however clearly there is concern amongst advisers that some aspects of the Retail Distribution Review will result in confusion for the customer. We are therefore working with the FSA to encourage simplification of the proposals to make sure that the Retail Distribution Review is ultimately to the benefit of customers.”
For more information please contact Sara Lister, Senior Media Relations Consultant on 01793 503810 or 07785 885161.
Notes to Editors
1. About the research
The in-house research was conducted using an online poll to target independent financial advisers. The poll generated a total of 910 responses completed in September 2007.
2. About Zurich
Zurich Financial Services Group (Zurich) is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Founded in 1872, the Group is headquartered in Zurich, Switzerland. It employs approximately 58,000 people serving customers in more than 170 countries.
