Financial Conduct Authority – dedicated but Clueless

From July 2022 The Financial Conduct Authority will control the Funeral Plan Market. And they will effectively be directing the public to buy the WORST product currently on the market, the non-profit whole of life plan – which pays high commission.  They are usually called Over 50s plans, though some proper prepaid funeral plans also use that title. According to the FCA, they are intent on stopping commission as it is by default “evil.”  It is hard to see the FCA as sane or indeed acting in the interests of the public, and it is my belief that they are actually the most corrosive factor in the financial well-being of the majority of us, by depriving us of advice, ideally independent.  But the big home service insurance companies are long gone, and 95% of the population is left to advise itself – hence the forced imposition of automatic enrolment pension schemes.

As they have done in wider financial services, the FCA will be seeking to ensure that the well-off benefit from independent advice and the rest of us have to rely predominantly on people selling their own plans or in some cases a very limited range.  The number of advisers in retail financial services has declined by around 95% since 1988, and I believe the current number of Independent Financial Advisers is less than 27,000.   With each one managing say 150 clients, that means they can look after just the richest 6% of the population – the FCAs pals?

Not only will their move damage innovation in the market, and put many small funeral directors out of business, but it will also mean that the public will have only three options:

  1. Research the whole market or
  2. Take pot luck with a direct salesman’s spiel who can only talk about one firm’s products (it may be some will act for two or three companies – we don’t know for sure yet).
  3. If you can find genuine Independent Advice, pay a fee.  £300 would be adequate to stay afloat, but I suspect most folk would be willing to pay less than £100 per plan, which would not even cover the running costs. At £100 a time, the first-year costs of Regulation might be covered by the end of the year – but with nothing towards our costs or income.

The Financial Conduct Authorities concern is over the commission, and they think that prices will reduce if it is not paid.  The actual evidence (not something the FCA are over-concerned about – they apparently have papal infallibility and facts are irrelevant) is that this is not the case, the providers will just keep the extra profits.   Lovely people with very odd bees in their bonnet and a total misunderstanding of the public good. So as from July 2022 you can expect to pay perhaps £300 for genuine independent advice.   In my own case, I would need to put in something like 6 years profits into fees and security funds, and pay substantial ongoing fees.  I can’t afford to do this, and I don’t think for a second that people will be willing to pay significant fees, so it would become a heavily loss-making enterprise. The prepaid Funeral Review will be now more, sadly.

So who will the Financial Conduct Authority be helping?  Clearly, not the public.

  1. The big funeral directors will benefit as small ones lose out and
  2. The public will fall back on buying appalling Over 50’s non profit whole of life plans which pay high commission and are sold by FCA-regulated firms.  That is seriously perverse of the FCA. These dreadful plans already sell in far greater numbers than proper prepaid funeral plans. If the FCA were up to their job, they would have stopped sales many years ago.
  3. Google – the cost of advertising clicks has already doubled, and I expect it to double again, eating up most of the savings on commission!

Rant over! I expect to stop offering advice on prepaid funeral in 2022 and concentrate on growing our sister business.