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Cash blow for franchises in multi-tie plan

Franchisees face serious financial obstacles in becoming stakeholder multi-ties under the FSA proposals to end polarisation.

The news will come as a blow to the likes of Allied Dunbar which has the biggest network of 4,300 franchisees.

Currently, PIA costs and compliance assistance are covered by the parent company. But the FSA proposals say multi-tied firms must be dir ectly authorised, with these costs expected to shift on to the agents.

IFAs believe the main motivation for tied agents to make the jump to multi-tied status will decrease significantly because of the added responsibility and costs direct regulation would create.

The problem is not expec ted to affect tied agents with high-street banks or big direct salesforces but it would be a serious problem for franchisees and those thinking about leaving their sales force to become multi-tied.

DBS spokeswoman Sue Lewis says: “It is an interesting issue. The FSA needs to deal with it if they intend to proceed with the concept of multi-ties. Our main concern is the consumer is losing out.”

Aifa director general Paul Smee says: “I strongly feel these firms should be directly authorised for the protection of the investor.”

An FSA spokesman says: “We are considering all these issues and they will be dealt with in the consultation process.”

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