AAs/RAIPIs and AAM

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

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.

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)

Central Bank Hanbook

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

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'

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-->

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

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

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

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?

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

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) ?.

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?

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).

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.

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

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

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.