The battle to retain polarisation, closely fought by consumer groups and IFAs, is all but over.
The Government made up its mind long ago that it would be prepared to see polarisation fall by the wayside in return for the bancassurers and others promoting stakeholder. Anyone who believes the “consultation” is anything other than a farce is deluding themselves.
There is no logic in the proposed changes – simply an expedient decision from an expedient government. No one has thought to ask whe ther it is in consumers' best interests, largely because it clearly is not, and the Gov ernment and the regulators only hear what they want to hear.
Polarisation was introduced as one of the lynchpins of the 1986 Financial Services Act. Up until then, buyers of financial products were frequently deliberately misled by commission-hungry tied salespeople masquerading as independent advisers into buying a product that was neither suitable nor good value for money.
Anyone who denies that this was common practice is either in total denial or has been living in Outer Mongolia for the past 20 years.
Most of the really unacceptable practices, short of fraud, which have been uncovered in the past 20 years have been perpetrated by the life companies, their salespeople and tied agents.
It is to IFAs' credit that they came out of the pension misselling scandal if not exactly smelling of roses then certainly with many fewer black marks against their reputation than the life companies.
The product providers and the big high-street financial institutions have a lot to answer for. Who was responsible for the pensions misselling scandal, closely followed by the mortgage endowment scandal, whi
ch will undoubtedly be superseded by the pension drawdown scandal unless the regulator does something fast? The biggest offenders in all these situations were the direct salespeople and tied agents of the product providers and the high-street banks and building societies.
Allowing multi-ties is like putting the clock back 12 years to the bad old days when tied agents could pretend that they were giving independent advice and the client did not know that they had simply been sold the product with the highest commission.
It is a very sad day for consumers when polarisation is finally abandoned. But since this is more or less inevitable, IFAs must fight back. There is no doubt that, over the past 12 years, consumers have become more discriminating and have come to value genuinely impartial, independent advice.
About 60 per cent of all pension business and more than half of all new business for all investment products is now accounted for by IFAs.
But the most common question asked by the financially aware looking for help is, how do I find genuinely independent advice?
IFAs must do something to raise their profile and improve their image. Recent research by First Direct, the telephone and Internet arm of HSBC, reveals their customers want independent advice and if you took a straw poll of 10,000 high-street bank customers, no doubt they would all say the same.
Whether or not First Dir ect's 50 former in-house tied agents selling investments from a panel of just 23 out of over 100 fund managers can be called “independent” or not remains to be seen. But independent advice is certainly what the customers say they want.
In the past, IFAs have been at odds with each other, with rival professional and trade associations constantly slagging each other off. The result is that the “brand” of IFAs is weak. Each firm seeks to promote itself individually and is not prepared to put resources behind a generic push.
IFAP claims to represent IFAs but, with funding exclusively from the product prov iders, there are limits to what it can and cannot say.
IFAs must get together and promote independent advice as the highly desirable service that it is. If this means generic advertising instead of individual firms promoting themselves, then this is certainly a step in the right direction. The sooner IFAs bury their differences and get on with promoting independent financial advisers as a “brand” the better.