# AAs/RAIPIs and AAM



## Freddie Kruger (30 Aug 2001)

Should RAIPIs and AAs continue to contribute to AAM in light of the revelation that most of us are dangerous and that if you can find a way of not using them you should do so?

Everyone seems to be still on board, does this mean that all self respect and consideration of yourself as a worthwhile human being is gone out the window?


----------



## Marion (30 Aug 2001)

Hi Freddie

You really should not take such comments personally. Many professions have been disparaged at various stages on the board.

We know, that the comments do not apply to the salubrious contributors on AAM.

We’d miss your clever ripostes if you left.

Marion :hat


----------



## Liam D Ferguson (30 Aug 2001)

Hi Freddie, 

I think Brendan's wrong in what he said in the book.  I said so in another post.  He might reword that piece or print a counter-opinion.  I'm not sure.  But either way, just because Brendan wrote something in the book that I think is wrong, that doesn't mean I think that contributing to the site is not still worthwhile.


----------



## Tommy (30 Aug 2001)

I don't really want to comment on the substantive issue, so to speak, but the healthy thing about AAM is having the chance to hear both sides of the argument. We are all much better informed as a result. For example, only for AAM, I don't think I would know the difference between an AA and a RAIPI.

Keep playing away Freddie - don't mind the tackles, even if they get a bit dirty every so often!


----------



## jem (31 Aug 2001)

Freddie,
I think you have made a very valid point in your post.

You have made each and every broker on aam think about his/her position.

For my part I will post my final thoughts over the comming days.


----------



## UDS (31 Aug 2001)

Most of the comments about the statement in Brendan's book have not been supportive.

It would be a shame to withdraw from a discussion group because you disagree, however strongly, with the views of one contributor, however important.

The correct response to a statement with which you disagree is to challenge it, not to walk away from the discussion.


----------



## The Virus (31 Aug 2001)

:lol :evil :lol :evil <!--EZCODE BOLD START-->* <!--EZCODE ITALIC START--> AAM falling apart??<!--EZCODE ITALIC END-->*<!--EZCODE BOLD END-->:lol :evil :lol :evil


----------



## Marion (31 Aug 2001)

Let me remind everyone of where Brendan has <!--EZCODE BOLD START-->* always *<!--EZCODE BOLD END-->stood on this topic. 

<!--EZCODE BOLD START-->* The great advantage of this form of discussion is that you can get a number of opinions. If your accountant or broker is dishonest or incompetent, you may get poor advice. If you receive an incorrect or inadequate answer to your question on Askaboutmoney, someone else will correct it very quickly…..If you have a particularly complex question, you should go to a professional advisor…*<!--EZCODE BOLD END-->

The above has been taken from the Askaboutmoney mission statement.

Brendan has stated he will change the wording in the book which caused offence to many

UDS is right, one should not back away from the issue, challenge it and <!--EZCODE BOLD START-->* prove*<!--EZCODE BOLD END--> that Brendan is wrong. Don’t play into the hands of those who would like to see the demise of this great site.

Marion  :hat


----------



## Sumatra (1 Sep 2001)

Freddie Kruger! Marion smoking Havanas! The Virus no wonder Brendan is in such a state!

Sometimes I can see him there, stirring it up chuckling away to himself. If it lends a certain balance let it be. 

RGDS,  Sumatra


----------



## Freddie Kruger (8 Sep 2001)

Civility and humour from the brothers and sisters of The Virus

themoneybag.com/vb/showth...eadid=5511

AND

There is alot of common sense in the first of the two links on this page from our friends across the Atlantic

boards.fool.com/Message.a...t=postdate


----------



## endowed (21 Sep 2001)

*B&F article*

I have just come across this recent article in “Business & Finance” magazine written by a certain well-known contributor to AAM. I feel the article adds a lot of knowledge to the rest of us who maybe are not totally “au fait” with the debate that is taking place in the Broking industry.

I also just love the Heading on the article!    It was probably the sub-editors at B&F who dreamt that one up but it would’nt surprise me, given his capacity for wit, if this particular AAM stalwart put the idea in their heads!   

Here’s the article:

<!--EZCODE BOLD START-->* Knowing Your  AAs From Your RAIPIs*<!--EZCODE BOLD END--> 


 (After many years of self-policing, this year at last sees the implementation of a strict regulatory regime on all investment intermediary firms, which includes life assurance and insurance brokers and agents. All such firms are now regulated by the Central Bank and the new codes of conduct, which are due to be published shortly, will offer the consumer greater protection against fraud and dishonest advice. But, Liam Ferguson argues, the new regime won't necessarily evaluate for the customer which category of broker is best for his particular needs) 

The new regime, under the terms of the Investment Intermediaries Act 1995, creates three new categories of broking firm - Restricted Activity Investment Product Intermediary (RAIPI), Authorised Adviser (AA) and authorised Cash Handler (ACH). Approximately 2,500 applications have been received from firms by the Central Bank for authorisation to operate in one of the above categories. By far the most popular category (c 64%) is RAIPI. In essence, a RAIPI can only give advice on the products of companies with whom it holds an agency. A distant second in the popularity stakes is Authorised Adviser (c 33%). An AA can advise on all products in the marketplace, whether or not it holds an agency for them. By extension, an AA is obliged to advise on the most suitable product for particular needs, irrespective of whether or not it holds an agency with the product provider. Finally, the small number of advisers (c 3%) who will be Authorised Cash Handlers will be allowed to exercise discretion in the management of client investments and as the name suggests will be allowed to handle cash. It will be obligatory for firms to clearly display their status on all headed paper and promotional material so it shouldn't be too difficult to recognise one from another. Don't be too worried if your local friendly broker doesn't display his status under the Act clearly at this time - the Central Bank will shortly be sending out the definitive code of conduct booklets to all firms, which will contain the required texts to display - until then you'll have to ask. 

So that's the quick guide to the three types of adviser. The obvious question that follows is "Which one is the better adviser?" Unfortunately, the answer is not to be found in the Investment Intermediaries Act. At first glance, it might appear that consumers will get better advice from an Authorised Adviser or Authorised Cash Handler than from a RAIPI. After all, an AA or an ACH can and must offer advice across the whole range of suitable products available in the entire Irish marketplace. Indeed the Irish Brokers Association, one of two industry representative bodies, made it obligatory that all it's members become Authorised Advisers. In this month's Irish Broker magazine, Paul Carty, the Association's CEO writes "One simply has to be independent to do the job of a broker, and as such in the new environment it is only Authorised Advisers who are in a position to be truly independent. Therefore I suggest that only Authorised Advisers should properly be described as 'brokers'". 

But let's just think about this for a minute. You pop into your local broker with the good intention of starting one of these SSIAs everyone's talking about. Your broker's an Authorised Adviser, so you presume that you're going to get the best advice across the whole marketplace. But your broker's got a problem. If he recommends an Ark Life or an EBS product to you, they won't pay him commission as they only distribute their products through their own channels. If he recommends, say, a Friends First or an Irish Life plan, he'll get paid commission. So what's he going to do? One solution is to recommend a commission-paying product to you first, and worry about valid reasons for justifying that recommendation afterwards. Is such a broker acting unethically? Certainly. Is he breaking the law? Probably, as he's not necessarily offering the most comprehensive advice. Is he going to get caught by the new regulations? Not if he's clever enough to document valid justifications why he believed the recommended product was best for you. While the Central Bank will audit brokers' files from time to time, it cannot reasonably be expected to argue with brokers over the relative merits of one product over another. 

There's another flaw in the argument that an Authorised Adviser is by definition going to give more independent advice than a RAIPI. The product providers who choose to distribute their products through their own sales channels and not via brokers - Quinn Life, EBS Summit Funds, Ark Life, Lifetime, Royal Liver, Scottish Legal and Acorn Life - are under no obligation to reveal the technical details of their products to brokers. Why would they? Brokers don't sell their products - they're the competition. So how can an Authorised Adviser give you advice on a product when detailed information about that product isn't available? They can't, and until this situation changes, they are stuck with offering advice on the products of companies who will happily reveal their secrets - those with whom they hold agencies. Which in essence is the same advice you can get from a RAIPI. 

Don't despair - the new regulations will make it far more difficult for a firm to run away with your money, and will raise the professional standards of how firms must operate. Just don't expect the new regulations to show you which are the excellent firms and which are merely average - for this information you'll still have to rely on the old method - ask for some recommendations from people who have used the services of a firm, and make a shortlist. 

Liam D. Ferguson is principal of Ferguson & Associates and www.FergA.com, RAIPI. &nbsp &nbsp &nbsp &nbsp


----------



## Ginty (21 Sep 2001)

*B&F article*

"If he recommends an Ark Life or an EBS product to you, they won't pay him commission as they only distribute their products through their own channels. If he recommends, say, a Friends First or an Irish Life plan, he'll get paid commission."

Which means the if you go to an AA he MIGHT offer you a life company product, he might also offer you ARK Life, EBS or Quinn Life. A RAIPI can ONLY offer you a life company product. In fact if you ask a RAIPI about EBS or Quinn Life, he's NOT ALLOWED discuss them.

"So how can an Authorised Adviser give you advice on a product when detailed information about that product isn't available?"

Who said that ARK Life, Quinn Life and EBS don't provide information? A RAIPI may still be competition for them but a fee charging AA??


----------



## Liam D Ferguson (21 Sep 2001)

*Re: B&F article*

Any of the fee-charging AA's reading this board getting details of product launches/updates/technical specs from Ark Life, Quinn Life, Scottish Legal, Ark Life, Lifetime, EBS Summit etc.?

It's not enough to say that, for example, EBS Summit are very forthcoming about their technical product details.  They all must be equally forthcoming in order for the advice to be genuinely independent.


----------



## Mithrandir (22 Sep 2001)

*The Real World*

There is more hype than reality behind this point. Its just the latest fashion. The last was cold calling. Others will follow.

The CB knows perfectly well that there's no such thing as the best product. Equally the CB knows that we're not in an Irish market place of product choice, but a European one for most products, and a global one for some. The staff at the CB are highly qualified persons. But sometimes those in the insurance sector prefer to believe that they don't or can't understand the 'unique' life market.That of course is nonesense.

The CB wants to see AA's provide appropriate independent advice. The key word is appropriate. When it comes to investment products lowest cost doesn't mean best, and can be countered by default risk, lousy performance, reliance on one manager etc. But the CB I guess is concerned to eradicate clearly inappropriate, biased 'advice' sailing under the independent flag. In perticular the CB I guess is horrified at the levels of concentration it has unearthed within the old 'insurance broker' market on just one company. Like it has found too many so called independent brokers giving 80% of business to just one life office. This is it's target - make no mistake.

The CB not going the 'best' product route, since it would mean the Regulator having to assess periodically from the huge global choice of investments which is best at any point. Even for the most simple of all, demand deposits, the assessment can be confused by poorer credit ratings from the top deposit player, and also by terms of business, where fees are offset by commissions etc.

So give the CB credit for having highly informed professionals on it's staff, who have quickly familiarised themselves with the insurance game.


----------



## Liam D Ferguson (22 Sep 2001)

*Re: The Real World*

<!--EZCODE BOLD START-->* "Like it has found too many so called independent brokers giving 80% of business to just one life office. This is it's target - make no mistake."*<!--EZCODE BOLD END-->

Interesting as always.  Obviously until the CB audit roadshow really starts to roll, many of my questions will remain unanswered, but I'll be very interested to see their reaction to so called independent AAs giving 100% of their business to just the broker life offices.


----------



## Mithrandir (23 Sep 2001)

*Guess*

My guess is 200 to 250 AA's tops. The other 650 to 700 will voluntarily withdraw their applications


----------



## Freddie Kruger (4 Oct 2001)

*Re: Guess*

Hi Mithrandir,

Could you please elaborate on why your estimate is so low?

At what stage do you expect those, that currently stand authorised, to be 'advised' to withdraw their applications?


----------



## Mithrandir (4 Oct 2001)

*Why the guess.*

First, its purely an educated guess. It is based on first hand experience of precisely what an authorised advisor application process is like. Two of the three main issues, probity, and skill are subjective assessments, particularly the latter.

But apart from that, consider that over 700 of the 900 firms applying have no CMS, running their operations. In other words they have not invested in industry specific technology, relying, presumably on paper files, and life office support.

Yet these same firms now wish the regulator to allow them to market themselves as the most modern and sophisticated advisors with a broad and largely unrestricted ability to advise from the most simple product to complex financial instruments.

My guess is that the CB reckon that most applicants, while having their heart in the right place are simply not resourced enough to be labelled AA by them. By the way that's not a wish on my behalf, merely a reading of the tea leaves so as to speak.


----------



## Freddie Kruger (4 Oct 2001)

*Re: Why the guess.*

Of the 'over 700' , how many of these would have access to Misys, Relay etc.? I know I may be splitting hairs here but are these systems not industry specific to the 'other' "investment instruments" referred to by the CB.

Is it your opinion that these lads and lassies will get nailed on not having a CMS for a part of their business that may account for a limited portion of their income ie L&P?

Any thoughts on Assurelink or what Eagle Star recently rolled out?

BTW. What about the second part of my original question?


----------



## orna (4 Oct 2001)

*Why the guess*

Where does the whole question of overides to brokers sit with the Central Bank,given that it could be one of the primary reasons a Broker gives the majority of his business to one Company.
Should they be discontinued and priced into the product going forward ?


----------



## Liam D Ferguson (4 Oct 2001)

*Re: Over rides*

Hi Orna, 

I can't speak for the CB, but my guess is that they aren't likely to discontinue over-rides.  Commission agreements have been scrapped so each life company is free to pay whatever commission it can afford.  Any broker who is in receipt of such over rides must disclose it on quotations so the customer will be aware.  

However, if as you say a broker is recommending a particular life office purely because they pay higher commissions than another, I'd imagine that the CB would go after that broker, rather than the concept of over-ride commissions in general.

Regards, 

Liam D Ferguson
www.ferga.com


----------



## bedlam (4 Oct 2001)

*Central Bank Handbook*

Is there any reference in the handbook to the question of soft commissions,which I suppose is another name for override commission.


----------



## Freddie Kruger (5 Oct 2001)

*Re: Central Bank Handbook*

Yes. Chapter 1. Paragraph 15.1 on page 14 (AA Handbook)
       Chapter 1. Paragraph 12.1 on page 13 (RAIPI Handbook)


----------



## bedalm (5 Oct 2001)

*Central Bank Hanbook*

Hi Freddie
Thanks for this.As I dont have the hand book what do these sections say
Bedlam


----------



## Freddie Kruger (5 Oct 2001)

*Re: Central Bank Hanbook*

Sorry Bedlam. The link to the Central Bank site, where the handbooks are, is posted in the Savings and Investments Forum under the post 'Central Bank issues guidelines to intermediaries'


----------



## Sir Ivor (6 Oct 2001)

*Re: The Real World*

There's probably less to this posting of yours, <!--EZCODE ITALIC START-->_    Mith_<!--EZCODE ITALIC END-->, than meets the eye. 

I just want to be quite clear what you are saying.

I think we can all agree that <!--EZCODE BOLD START-->*    QLD*<!--EZCODE BOLD END--> are the best value in the market and, notwithstanding any spurious and mischievous insinuations about credibility and security, would patently satisfy the <!--EZCODE ITALIC START-->_  "best"_<!--EZCODE ITALIC END--> or <!--EZCODE ITALIC START-->_  "most suitable"_<!--EZCODE ITALIC END--> criterion in most cases.

Are you saying that the CB will turn a blind eye to this reality and so long as an AA is kinda spreading it around, she won't be hung out to dry for not recommending QLD <!--EZCODE BOLD START-->*    ever*<!--EZCODE BOLD END-->?

If that's the way it is, this is an Irish solution to make the forthcoming umpteenth referendum on Abortion look positively reasonable.:smokin    

<!--EZCODE BOLD START-->*    <!--EZCODE ITALIC START-->    I used to think I couldn't ALWAYS be right.  I was wrong<!--EZCODE ITALIC END-->*<!--EZCODE BOLD END-->


----------



## Mithrandir (6 Oct 2001)

*Suitability, and all that.*

Sir Ivor, my view is as stated, even before the CB handbook was published. You know who I am, so give me a buzz, and I'll glady discuss. Best regards


----------



## Sir Ivor (6 Oct 2001)

*Re: Suitability, and all that.*

<!--EZCODE ITALIC START-->_ Mith_<!--EZCODE ITALIC END--> I feel my old self again.  You will appreciate how difficult it is for me to pick up a phone or speak human talk.

Let me hypothesise:

XYZ is well known as having red hot products.

XYZ  is kinda secretive and does not give info to AAs.

XYZ most certainly does not pay AAs for recommending its products.

Is the AA still bound to recommend XYZ?

Will a blind eye be turned to an AA who ignores XYZ but otherwise is seen to operate reasonably equally between the other companies who are somewhat more supportive of the AA?

I sense that you believe that this whole argument is being mischievously overhyped and that it will all be all right on the night provided nobody is blatantly going for the next exotic trip.:smokin


----------



## Liam D Ferguson (6 Oct 2001)

*Re: Suitability, and all that.*

Hi Sir Ivor, 

Extract from the AA bible...

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> "2.1 An Authorised Advisor must ensure that it acts to the best advantage of its clients. Arising from this requirement Authorised Advisors must, taking all relevant factors into account, recommend for each client the most suitable product available, regardless of whether or not the Authorised Advisor holds an appointment in writing from the relevant product producer.

2.2 In assessing whether or not an Authorised Advisor has acted as required in Requirement 2.1, the Bank will have regard to all the relevant circumstances of the transaction including:

a) the nature of the transaction;
b) the price and availability of the investment instrument where appropriate as well as the general condition of the market at the time;
c) the services which the Authorised Advisor holds itself out as providing;
d) all charges to be levied on the investment instrument concerned;
e) the size of the order;
f) the nature and extent of enquiries made by the Authorised Advisor in the market place;
g) the terms of the order given by the client, including the date on which the order was placed; and
h) where an Authorised Advisor uses a single product producer for the execution of transactions, the criteria used in choosing that product producer."<hr></blockquote><!--EZCODE QUOTE END-->

Looking at (f), I'd say that your local friendly AA will certainly be required to illustrate it's knowledge of products outside of the usual suspects, or at least that it has tried to obtain that knowledge.  

What's everybody's opinion of (h)?

Liam D Ferguson
www.ferga.com


----------



## Freddie Kruger (10 Oct 2001)

*Re: Soft Commission*

It seems that override commission is not included under the headings of 'Inducements' or 'Soft Commission' as it is <!--EZCODE BOLD START-->* Disclosable*<!--EZCODE BOLD END-->.

Anyone got any views?


----------



## cillian (10 Oct 2001)

*Soft Commissions*

Freddie
Am I reading the Handbook for AA's correctly nowhere can I find reference to pure life products as opposed to investment products apart from the fact that the book refers to the need for disclosure(for life products) as introduced in January.Am I correct in sayimg that this is the only reference ?
Thanks
Cillian


----------



## Bedalm (10 Oct 2001)

*Soft Commissions*

Freddie
Under section 5 client documentation
"details of commission structures if any,through which the AA is or may be remunerated"
Would this not cover overide (soft commision) ?.


----------



## Mithrandir (10 Oct 2001)

*Suitability*

Suitability, in most product selections except I suggest those below contains an element of subjective judgement by the advisor. But it also contains the vital issue of client choice, often as we know influenced by brand choice.

Hence QLD has got a small slice and not all of the tracking fund market.Even if all investors were DIY heads, this wouldn't change much, as evidenced by the feedback towards a minnow. Points of obvious difficulty for an advisor are Term Assurance, Motor Insurance, House Insurance, Cash deposits, ( assuming from investment grade banks), term Critical Illness perhaps.

Investment products, particularly of the active type or smoothened, require other important judgements other than price. These are arguable points, and I don't believe the regulator is out to debate with good professionals., This part of the code is targeted specifically at those who over concentrate business, don't do any product analysis except on a golf course, and think client research is when you sleep with a clients wife?


----------



## Freddie Kruger (11 Oct 2001)

*Re: Investment Instruments*

Cillian,

If I am reading your question correctly I think that you will find the answer here

[broken link removed]

Particularly (m).


----------



## Seamus Byrne (11 Oct 2001)

*Re: Suitability*

I think the U.K. in this case has got it right. If there is no investment involved... i.e. Term covers including critical illnes etc and obviously buildings, car etc are all NON regulated and therefore do not need an A.A. or R.A.I.P.I. to sell them. 
This is what the mortgage broking industry sells on a daily basis.


----------



## tortoise (11 Oct 2001)

*barrier to entry and competition*

Consider the effect of regulation. It raises the barrier to entry by creating entry or participation standards. The effect is always to increase costs.
So we have the creation of entry barriers and escalation of costs. 
But where is the line between regulation for protection ie the good of society and negatively effecting the competitive landscape to the detriment of society. 
Are we seeing a regulatory authority that will in effect  undermine competion and create a situation where the regulator may well become a captive of the regulated.
Is it not the case that the cost of regulation is ultimatley borne by the consumer ? Does it not suit some market participants to argue for regulation knowing that it creates a highly effective barrier to entry ? Can it not be argued that this is an efficient competitive policy ?

T


----------



## Wings Of Chicken 1 (12 Oct 2001)

*Re: Suitability*

Seamus,

The situation won't remain that way in the UK for much longer.

Until 30 April last, all 'Brokers' in th UK were regulated under statute by the Insurance Brokers Registration Act. This will not have affected your firm, since it is not a 'Broker'.

However, you should be aware of the likely impact that the General Insurance Standards Council will have. Once it has got over its implementation hurdles, ALL sellers of non-investment products will be regulated by this body, and if they refuse to join the GISC, the Insurers are obliged not to deal with them.

Wings

Wings


----------



## Seamus Byrne (12 Oct 2001)

*Re: Suitability*

you are right up to a point... as of last month it is all up in the air again... they are back to talking about professional introducers of business to already qualified agencies.


----------

