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Allied Dunbar: Multi-ties won&#39t work but gap-filling would bring benefits

It seems a long, long time ago that polarisation was introduced. In the rapidly changing financial services marketplace, 12 years is a long time. However, it is not so long ago that we cannot remember the marketplace that existed before polarisation was introduced. In those days, we had insurance brokers and agents – and those agents typically represented several product providers.

It was confusing. Consumers could not really differentiate between the different types of agents and had absolutely no idea who was taking responsibility for the advice that they gave.

Polarisation came along and changed that. The two different types of advisers became clear – as did the question of responsibility – and order was brought to a rather chaotic marketplace.

As I said, that was 12 years ago and the industry has changed significantly since then. I believe some modifications to the rules are appropriate so that they evolve with the marketplace – modifications, not wholesale replacement.

The big question being debated at the moment is whether the rules should be changed to allow multi-tied advisers or to allow product providers to “gap-fill” their product range with products from other firms.

Let us consider multi-tied agents first. Would this be a change to the existing rules or a winding back of the clock to the pre-1988 position that everyone agreed was far from ideal?

The fact remains that multi-ties did not work before and I have seen no evidence to suggest that they would work any better second time around.

Quite simply, there are too many questions and not enough answers. For example, what type of training and competence regime would apply? Would these multi-tied advisers need to undertake specific product training as current tied agents are required to do? If so, who would provide it? Who will be responsible for monitoring the activities of those advisers?

This rather points to a very much increased role for the FSA but the recent report by London Economics indicated only minimal cost increases for the multi-tied option. I believe this significantly under-estimates the true cost of regulatingmulti-tied advisers.

And then, of course, there is the question of responsibility. If their advice turned out to be wrong, given the information available at the time and the multi-tied adviser had left the industry, who would take responsibility for putting things right? The provider who gave the adviser the basic training? The provider whose product the adviser actually sold? The regulator? The answer is no one.

No responsible industry could tolerate the lack of accountability and confusion in this system.

By contrast, consider the position under the “gap-filling” scenario or product tie. Under this option, the host provider determines what products are added to its range. The host provider ensures its tied agents have been fully trained in the whole product range, including any gap-filling products from other providers. The host provider&#39s compliance team monitors the activities of the advisers in relation to all the products they have to offer.

Most important, the host provider stands fully behind its advisers and takes full responsibility for the advice they give. So, if the advice given, based on the information available at that time, turns out to have been incorrect, the host provider also has to provide the consumer with the appropriate redress. For the consumer, this one-stop-shop for redress is simple, comprehensive and transparent.

Multi-ties are not the way forward for this industry. They would be a significant step back. They would destroy the strengths of polarisation.

Gap-filling would give the consumer greater choice of products but with no loss of the security that the tied sector currently offers. It would retain the fundamental principle of polarisation while allowing the market to evolve.

At Allied Dunbar, we have already shown that gap-filling can work. Our inclusion of other providers&#39 non-regulated products in our range and our market-leading app- roach to mortgages is proof of that.

Gap-filling of regulated products isa logical extension of an approach thatwe know can bring real benefits to consumers – and long may the evolution continue.


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