Regulation of Funeral Plans: Developments in 2019

News from Parliament – regulation of funeral plans.

The Financial Conduct Authority is to take on the overall regulation of funeral plans sometime in 2021.  Of course, they already regulate parts of the market now, directly or indirectly.  Client funds are quite well protected already.

I have to say that my concern is that the FCA will continue the slash and burn policy of its predecessors, which has deprived most of the UK of the ability to get affordable INDEPENDENT Financial Advice.  As pretty much the only independent funeral plan advisers in the UK, we’re worried that the need for Independent Advice will continue to be low priority, and therefore life will be made very difficult for those trying to give advice from across the market. Lack of direct competition through Independent firms will mean for people selling just a single providers plan, so anyone wanting to check things out carefully would have to interview twenty or so salespeople, and analyse the written material they give out (assuming you can actually get it!)

Here are some thoughts for the Financial Conduct Authority:

Regulation tends to be expensive, heavy-handed not light touch. Can you change your spots?

The first priority is the use and management of client funds and what can be taken out of them once they are in Trust and make that information readily available.

Second is the issue of who provides guarantees – is it the company with the £1 capital? This should be clear in all literature.

Third is sales techniques, selling over the phone without sight of full details should be banned, and all sales people should be referenced and Disclosure checked. Training on vulnerable people is a must, but that aspect is going to be impossible to manage with the compo culture fostered by regulation as nearly all buyers are at least as old as me and therefore may be considered incompetent!

Fourth, training of salespersons is where it starts to get difficult – if every company is required to train everyone who sells its plans, the embryonic independent advice market is likely to be stifled, to great detriment to both the market and the consumer.   Look at what has happened in financial services – 90% of advisers gone. nearly 100% of company sales forces gone and independent financial advice now only available to the rich.

Fifth is commissions – the FCAs standard response is to insist on fees being charged. We are generally talking about people who neither have a history of taking professional advice, nor significant financial resources, which is why they are setting up the plan. Whilst I agree that commission levels should not be the reason a plan is sold, there would be many fewer sales if there was no commission and a greater burden on credit cards to pay for funerals.

We have made a start on an independent course, which we hope would be supported by the FPA, but its’ first draft was too rough, and I have yet to send them the second – just been too busy!

Steve @ The Prepaid Funeral Review on the regulation of funeral plans.

Funeral Plan Regulation.

“Funeral salesmen ‘misleading customers’ over contracts, MP says (we agree!)  Funerals paid for upfront should be subjected to tighter regulation to prevent people being hit with hidden charges, ministers have been told.” We do agree that many adverts for funeral related products are misleading, as are some funeral plan websites.  We also agree that some “salesmen” don’t understand the products they are selling.

But the record of the regulation of financial services would appear to show that their greatest achievement in times of rising need is to prevent the public from getting advice at all.  So whilst we do agree that improvements are needed, we don’t think you could pick on a more overpaid and less effective bunch than the Financial Conduct Authority to “improve” things.

Our suggestions would be:

  1. Complain about misleading adverts to the Advertising Standards Authority.
  2. Read the brochure and terms of business before buying a plan – even if it is through us!
  3. Annoy the provider by paying by cheque. It is more secure.
  4. Providers should impose knowledge tests on their own staff and agents (in fact we have heard moves in that direction already).
  5. Report liars and cheats to Trading Standards.
  6. Have SIMPLE licencing system for sales people. Our staff are all properly checked out. Pretty much anyone other than the FCA could run such an operation on an annual fee of £25 or so with initial application fee of £50 or so to include criminal records check.  Any complaints could be reviewed by the same organisation.  If the FCA get the job they will want to appoint a Director of Funeral Plan Regulation at a cost £500,000 a year with all the trimmings and an executive team in expensive Canary Wharf.  They will make sure it is someone with no knowledge or understanding of the industry but great skill at devising complex, meaningless rules and hoops.   The Funeral Planning Authority is not, in my opinion, a candidate for this role as it is a gentleman’s club not a regulator in any real sense of the word.  That said, the recent announcement of an independent board may signal a change in the right direction: perhaps they will sort out their members before laying claim to regulating non-members.
  7. A recent development which we don’t like, and is a miss-selling scandal waiting to happen is the cut down funeral plan.  Some of these could result in funeral (which family members can theoretically attend) being held 40 miles away at 9.30 in the morning.  Not great, in our opinion, just a lot more expensive than a Direct Cremation plan. They have their place, like direct cremation, but people need to understand their real impact before saving a few hundred pounds.
  8. MPs seem to have been misinformed – more competition in the funeral plan market is driving both innovation and more competitive pricing.  One provider is even training new Funeral Directors in a bid to reduce funeral prices.
  9. One massive component of the cost of a funeral is the cost of cremation.  Crematoriums usually have a semi monopoly position in their area.  Dignity in particular has been taking advantage of this and now owns or operates 17 of the 20 most expensive crematoriums in the UK, according to Funeral Booker. Surely time for the Competition and Markets Authority to take a look?