Author: By Stephen Foley
Sir John Banham, the former director general of the CBI, is to head a major new review of the way people pay for advice on pensions, mortgages and other financial products.
The review, to be launched later this week, is aimed at restoring confidence in financial advisers after a string of scandals, such as pensions mis-selling and the huge commissions paid to sell endowment mortgages.
Sir John will examine whether advice should be made compulsory for buying some products, and whether the costs should be paid up front by the customer – as for lawyers’ advice – or should be included in product commissions.
“We have the freedom to speak the unspeakable,” panel member Paul Seymour said.
The provision of financial advice has come under particular scrutiny in recent months, as the Government rolls out a series of initiatives encouraging people to make educated financial decisions on their own. It believes the majority of low-earners taking out the new stakeholder pension will not need to seek professional advice, and has also refused to bring mortgage advisers under the regulatory eye of the Financial Services Authority (FSA).
Sir John, who is chairman of Kingfisher and chairman-designate of Whitbread, will be joined on the panel by a number of high profile finance industry names. Derek Wanless, the former chief executive of NatWest, and Treasury adviser Professor Tim Congdon are taking part, and there will also be representatives from the Consumers’ Association and industry lobby groups.
Sponsored by the Institute of Actuaries, the panel will work closely with the FSA to ensure it comes up with workable proposals when it reports in the autumn. To begin with, it is seeking the views of independent financial advisers, insurance firms and lenders.
The last time the Institute set up a major review was last year, with an investigation into endowment mortgages. Its conclusion – that endowments are rarely good value – sparked an overhaul of the mortgage industry and led to many lenders dropping the product.
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