CUSTOMER AGREED REMUNERATION - CRA International

REPORT BY CRA INTERNATIONAL
Figure 13 Likely change in use of CAR product in the future
% of IFAs
70%
60%
50%
40%
30%
20%
10%
0%
Independent IFA (nonnetwork)
National Financial Adviser
(IFA) firm
Increase use of CAR No increase
Network member IFA All IFAs
Source: CRA International based on survey of 101 intermediaries conducted by ORC International.
However it is clear that the use of CAR will vary across the market. In particular, the
take-up by networks and nationals will only occur slowly over time. For example,
networks questioned why their advisers would choose to use CAR when they are satisfied
with the existing traditional products.
Based on current trends, CAR will not be commonly used in the non-IFA segment. There
are some examples of particular providers using a CAR approach for insurance direct sales
forces, however none of the banks currently use this approach and neither does there
appear to be any incentive suggesting that they would do so in the future.
There is also evidence of increasing application of CAR to different products, although this
will continue to focus on single premium products. In particular, there is little, if any,
evidence suggesting that the use of CAR and FGP products in the protection market will
develop in the medium-term in the absence of regulatory intervention.
It is therefore clear that ongoing trends will not, by themselves, resolve the problems
identified in the market. Although the use of CAR products will grow, they will only be
used in particular market niches. In the next section, we consider where the application of
CAR may be appropriate.
4.2 Application to different types of adviser and product
We now turn to consider where CAR could be applied in the future. Evidence from
consumers reveals that, given the complexities of the retail financial services market,
consumers would favour a single system that applied to all products and all types of
adviser. However, there are convincing arguments that suggest CAR should be limited to
particular markets which are explored in the sections below.
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