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A knotty problem

With the publication of the FSA consultation paper 121, multi-ties

now appear to be inevitable. Having associated themselves so publicly

with the concept, it is doubtful that the FSA will dramatically

change its proposals now.

Questions remain in many IFAs&#39 minds about what exactly is meant by

the multi-tied concept, given the noticeable lack of details in CP121.

Prior to the publication of the consultation paper – released two and

a half weeks ago – the perceived notion of a multi-tie was an adviser

or firm with agency agreements to five or six providers, only

advising upon and selling those companies&#39 products.

This notion appears to have been turned on its head, with the FSA

proposed definition being much more broad.

The industry&#39s interpretation of a multi-tie may still become a

reality although there was a noticeable absence of any mention of

agency agreements in the paper.

Because there will be no limits on the number of providers a firm

ties itself to, a multi-tie agent could in theory be “tied” to the

entire market and advisers still remunerated by commission. On the

other hand, a multi-tied firm may only be tied to two firms but may

still claim to represent a wide variety of providers.

LIA director of public affairs John Ellis says: “The biggest problem

is the product choice that advisers will offer and whether that is

biased by agreements they sign with providers. The public could be

totally confused and might think they are getting independent advice.”

Multi-tied agents will still be allowed to operate on a commission

basis despite the IFAs having to switch to a defined-payment system.

There are no details about how much commission can be paid or whether

one provider will be able to offer higher commission to att-ract


The FSA says it plans to imp-rove the clarity and importance of

disclosure documents that multi-tied advisers will have to give to

their cli-ents and reckons that should clear up any confusion as to

their status.

Aifa director general Paul Smee says: “The multi-tie proposals are

fairly obscure. There is no level playing field in how a multi-tie

will operate as opposed to how the IFA will operate. We are quite

interested in seeing how the disclosure regime will work.”

Some industry figures contend the FSA may have been deliberately

vague in CP121 in an effort to motivate the industry to come up with

their own ideas about what a multi-tie should look like.

Ellis says: “It may have been a deliberate move by the FSA to express

itself in a vague form. It lets it see what the industry may come up


IFAs say, however, the obscureness of the multi-tie proposition

leaves them unsure how to proceed, even if they do want to heading in

that direction.

IFA Pensions & Investment Management principal Phil Moore says:

“It causes me a great deal of confusion. Obviously I want to do what

is best for the business. But at this point you can&#39t formulate views

because you do not have the information you need to do it.”

In Moore&#39s case things are made even more confusing because he is a

network member.

He says: “Because I do not know what my network is going to do, I am

left hanging. But whatever happens I want to be a network member.”

Others are not bothered, however, and as they are intending to remain

independent do not see multi-ties as a threat.

IFA Legacies Asset Management senior adviser Nick Plumb says: “If

customers of tied providers are getting access to six prov-iders

instead of one then they are getting a better deal. It is not a

threat to my business.”

Whatever one&#39s opinion of the prospect of multi-ties, depending on

one&#39s position in the market there are many different interpretations

of what appears in the consultation paper.

Multi-ties will undoubtedly change in the market – whether it will

significantly damage the size and strength of IFAs is yet to be seen.

One thing is definite however, the industry is clamouring for more

detail about what multi-ties will look like and how they will operate.


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