Ignoring CAR is driving out consumers - Skandia

However, a small chunk of respondents to the study admitted models such as CAR would make them less likely to see a financial adviser.

The firm says the results of the study prove Customer Agreed Remuneration (CAR), as suggested in the Retail Distribution Review (RDR), is possibly the healhtiest way forward for the industry.

The remuneration model calls for advisers to make clear how much their advice costs at the outset.

Skandia says the results suggest CAR “could widen the appeal of independent financial advice to a larger section of society”.

Of the 1,000 people questioned, 22% say CAR would in fact make them less inclined to see an IFA, while 38% believe it wouldn’t make a difference.

The research also shows customers would not like to pay a straight fee, with 58% saying they would prefer the adviser payment to be made from their investment.

Skandia says the CAR proposal should be embraced by the industry.

Billy Mackay, Skandia UK marketing head, says it is important remuneration between advisers and clients is clearly established.

“This gives advisers an excellent opportunity to demonstrate the value of the advice and service they provide to their clients,” he says.

“In our experience, this evolution towards CAR options is already happening and the FSA should be wary of unnecessarily increasing regulation to force the pace of change.”

A number of provider firms appear to have foreseen the study's findings.

Zurich's investment brand Sterling yesterday announced it was offering a factory gate priced - similar in principle to CAR - version of its investment bond, while Prudential launched a comparable vehicle a fortnight ago.

Zurich already offers factory gate models across its entire pre and post retirement pensions offerings, while Winterthur – formerly Provident Life – has used a factory gate system on its pension products since 1992. Clerical Medical is also in the factory gate arena.

Mackay says giving customers understanding on the cost of advice and a range of payment options will encourage them further.

“There is a real benefit in having a choice of remuneration structures in the market and allowing advisers and their clients to decide which one suits individual circumstances,” he says.

“Ultimately it is about ensuring that advisers and consumers have informed choice.”

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