WHAT ON EARTH IS SALES ADVICE?
People called ‘advisers’ will still be able to sell financial products and earn money for doing so under plans published by the Financial Services Authority.
It had been hoped that the FSA would change the way financial products were sold by making advisers and sales staff completely separate and ensuring that commission could never bias the advice that was given (see my Point of View ‘Revolution in Financial Sales’ 30 April 2008).
But in a paper published a few days ago the FSA dashed those hopes. Instead of separating advisers who give financial advice from sales staff who sell financial products the FSA has come up with a confusing compromise – ‘sales advisers’ who do a bit of both. One industry insider has called the idea a ‘Frankenstein monster’.
It the latest paper of what it calls the ‘Retail Distribution Review’ the FSA sets out at least seven different categories of person who will give advice on financial products or sell them to us. Some will claim to do both. There will be
There are also at least three other categories floating somewhere between advice, sales, and money guidance for which no name has yet been invented.
The plans also fail to deal with the key problem of commission. Anyone who gives advice and also gets commission on sales has a conflict of interest with the customer. Commission paid to financial advisers has been behind most of the mis-selling scandals of recent years.
People who call themselves independent advisers will not be able to take commission in any form on the sales which result from the advice. But that will not be true of ‘sales advisers.’ Despite their name the ‘advice’ they can give will be limited to the products of the company that pays them. And it is clear – despite the generally impenetrable language of the FSA’s paper – that their pay can still be linked to the volume of sales they make. In other words they will have an interest in selling us stuff rather than giving us advice. Or their advice will be confined to recommending us to buy things.
Either way, why are they called advisers?
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