CUSTOMER AGREED REMUNERATION - CRA International

REPORT BY CRA INTERNATIONAL
Figure 18 Method of shopping around
80%
70%
60%
50%
40%
30%
20%
10%
0%
Another adviser Another company Friends Newspapers or
magazines
Internet
Source: CRA International based on customer survey of 209 purchasers conducted by ORC International.
It is clear from Figure 18 that when consumers state that they would shop around, they
are mainly thinking of undertaking comparisons through searching the internet or through
asking friends or family. Currently few intermediaries set out their charges for advice such
that consumers would be able to search for the cost of advice through the internet. It
seems unlikely that this will alter dramatically in the short-term, although over time
details of the cost of advice may be accessible through the internet (indeed this is likely to
occur once intermediaries can benefit from providing such information). Hence, over the
medium-term, if CAR is implemented successfully, additional gains may arise from
comparisons through the internet.
In the short-term, only 20% of those customers who agree that CAR would make them
more likely to shop around (10% of all customers) would do so through comparisons with
another adviser.
Intermediaries were also asked how consumers would change their behaviour and around
27% thought that CAR might lead to shopping around. This is substantially larger than
the proportion of consumers who state that they will shop around by comparing between
different advisers which suggests that using 10% of consumers as the increase in
shopping around based on the consumer survey would be a cautious approach.
In combination, therefore, these results support a modest increase in shopping around.
Provider bias
Second, in terms of bias, CAR should reduce the potential for provider bias. Assuming
that advisers will set the price of their services so that it does not vary by provider, this
could bring benefits of the order of £66 million a year assuming provider bias is
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