FCA Regulation of Funeral Plans – a discussion paper.

The Future Regulator
The Future Regulator

One has to accept that regulation of funeral plans COULD be of benefit to consumers. My comments concern retail financial services – advice given to individuals.

Regulation of Funeral Plans is needed.

  1. Selling practices are not what they should be, especially as many customers are potentially vulnerable.
  2. Funding of plans via trusts and insurance policies are opaque and it is not currently possible to compare true costs or the security of funds and what is taken out of them.
  3. Offshore providers may run to different standards.
  4. Too many “guarantees” are provided by £100 (or less) companies.

All of these objectives could be achieved fairly painlessly:

  1. No money to be taken until the purchaser has seen and reviewed the paper brochure.
  2. All sales to be checked by a personal totally independent of the sales team, and with some companies that would have to be external to the company.
  3. Standard reporting of costs and details of funds and cover so that it is possible to make sensible comparisons.
  4. The FCA should risk rate products, so innovative products can still be launched with suitable warnings.
  5. The FCA should take on the work of the Funeral Planning Authority and its staff who already know how the industry works and its issues and are already funded.

Future if prepaid funeral plansOn the FCAs past performance, what is likely to happen is that:

  • the fledgling Independent Funeral Plan advice industry will be immediately closed down.
  • The FCA will prefer fees to commission, so the sales structure of the industry will be decimated as only the wealthy like fees.
  • Innovation will virtually cease as it will be impossible for new firms to launch.
  • The cost of sales will rise by at least 10% due to excessive FCA costs and paperwork.
  • Good quality advisers will be driven out of the industry by demands to pay for the misdeeds of bad advisers and poor design or management by product providers.
  • Small providers will go out of business, big ones will have to spend even more money on advertising for a product which people are not desperate to buy!

Initially, a quick review of the achievements of Regulation:

  • The introduction and promotion of Compo Culture.
  • Punishing good advisers for the sins of product provider, of poor advisers, and regulatory
  • Supporting the wealthy (Equitable life compo)
  • Stopping those who really need Independent advice from getting it by pushing fees and decimating the direct sales forces of the Prudential, Coop, Brittanic, and many more.
  • Being at least a decade behind everyone else on most scandals as they don’t understand financial services for individuals. PPI, pension transfers, mini-bonds etc.
  • Second-guessing the industry and causing the problem with endowments.

 

1 thought on “FCA Regulation of Funeral Plans – a discussion paper.”

  1. Funeral Plan Reviewer

    Sadly, the FCA have decided to make Independent Advice accessible only to those who really can’t afford it. Exactly as they have done in Retail Financial Services – if you don’t really need advice, you can probably afford it.
    If you DO need advice, typically because you are not made of money, then you probably won’t be able to access Independent Advice if the FCA have their way.
    It is possible that they may change their minds, but their past track record is more one of damaging consumer interests believing that Independent Advice (of any sort) should be restricted to the wealthy – who are generally less in need of prepaid funeral plans.

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