Angela Knight, chief executive of the BBA wrote a letter to the FSA chief executive Hector Sants to insist that the Retail Distribution Review’s aim to create a market that allows more consumers to have their advice needs and wants addressed is in danger of not being met in the coming reforms.
She argued that the main issue is that advice would be put beyond the reach of mass market customers.
The BBA has proposed that there should also be a “simplified advice” model, to provide affordable and regulated advice to fill the gap.
“It would be delivered either face to face, by telephone or via the Internet and be affordable for the less well off customer,” added Knight.
Its key benefits would focus on straightforward savings, investment and protection needs more cost-effectively than full advice. It would be tailored for smaller transaction sizes than the full advice model.
The service would also be highly automated and deliver suitable, personal recommendations to customers with acceptable risks and safeguards – including recourse to the Financial Ombudsman Service.
Knight added that there is a concern that advice will be written off as too time-consuming, expensive and complex by the people who need it most, unless an alternative to full advice emerges.
She said: “We feel that simplified advice will provide the safeguards that consumers need, while delivering effective advice at a reasonable cost.”
A spokesman from the BBA said that all facilitators would be “required to have a professional qualification and training prior to the role.”
David Sheppard, managing director of Perception Finance said that a simplified advice model could only work if the transaction process is simple.
“Mortgages can get very technical and simplifying the advice model would be doing it a disservice.
“While there is a cause for simplified advice, this advice model could be used to show that banks and building societies are simply offering a service. What concerns me is that the advice may not be to the same level that IFAs could offer.”
He added that the quality of advice would also be at stake.
“The mortgage borrower should be getting clear, concise advice and guidance from their IFA, not going through a checkbox process with a facilitator.”
However, Michael White, chief executive of Email Mortgages, said: “Any move to a more affordable model will be welcomed as it would benefit less well off customers.”
