Beware of Single-Tie Annuity Distribution deals
The Retail Distribution Review (RDR) is on its way. Its aim is 3 fold:
- To ensure that consumers are offered a transparent and fair charging system for the advice they receive.
- To ensure consumers are clear about the service they receive.
- To ensure consumers receive advice from highly respected professionals.
FSA rules on adviser-charging under the RDR state that, from 2013, adviser firms can accept client charges but will not be able to accept “any other commission, remuneration or benefit of any kind in relation to any personal recommendation that they make or service related to it”.
This will mean that providers are keen to set up single tie deals because it guarantees distribution, and networks are attracted to extra revenues they will gain following the loss of sponsorship and commission.
It appears that there is already evidence that these are beginning to be formed.
However, from the advisers point of view being restricted to only selling products that are being provided by the network means they are not providing competitive rates. Their clients could end up with poor value deals and the advisers leave themselves open to clients looking at more competitive rates elsewhere and hence losing business.
Single-tie agreements run counter to Government efforts to increase the number of people who shop around for a retirement income.
It appears therefore that truly independent advisers, ie those not tied into a network, will be able to provide the best service.