After reading through CP121, I am at a loss as to what the future holds for our profession.
The FSA says in CP121 that the majority of consumers have restricted access to independent advice. It also mentions that consumers do not shop around between advisers and their choice of adviser is driven by trust and not status.
The FSA goes on to say that regulators and the industry must make sense of this reality.
The FSA then identifies five market failings – commission bias from IFAs, bad value for money for middle earners, commission on products leads to an incentive to sell an unsuitable product, consumers' lack of understanding of costs and my favourite – that the regulatory system itself puts impediments in the way of consumers shopping around.
It is all down to the way disclosure is not policed. When an IFA hands out his terms of business, the client is happy because it mentions the fact that the adviser is independent.
Only a complete idiot would then take tied advice, right? Wrong. And why? Because tied advisers lie through their teeth and/or are economical with the truth.
Mortgage brokers say they are independent but then under their breath say “on mortgages” – the poor client has no chance. Banks' advisers tell customers not to use IFAs as, because of our size, we provide them with no protection.
Most tied advisers hide their status under a mountain of paperwork – it is very easy to use proven sales techniques on clients. The answer is regular mystery telephone calls to clients regarding the status of their advisers.
The regulatory system needs to tighten up on polarisation, not get rid of it.
I suggest my fellow IFAs start to respond to consultation documents instead of burying their heads in the sand.
Financial Solutions 2000, Bracknell, Berkshire