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Catmark by IFAs could help consumer understanding

Royal London and its marketing division Scottish Life is taking a stance against the FSA&#39s view that only IFAs operating under a defined-payment system can be classed as independent.

The group&#39s response to CP121, Reforming Polarisation, says it is market choice, best value and product suitability that characterise independence, not the method of payment.

Rather than benefiting consumers, Royal London believes the abolition of polarisation will cause the IFA sector to shrink considerably, narrowing choice. It estimates as many as 70 to 80 per cent IFAs would become distributor firms, probably AFAs, so they can receive commission.

It says a risk of depolarisation not identified by the FSA is that IFAs switching to multi-tie status may churn consumers into contracts of their preferred multi-tie provider.

It suggests an alternative to the FSA taking a rule-based approach to controlling the use of the word “independent” is for the IFA sector to develop its own Catmarking standard.

It claims such a standard would allow advisers to differentiate themselves to consumers without the complication of FSA rules.

Scottish Life chief executive Brian Duffin says: “We do not think commission is incompatible with independence. The most important thing is that consumers understand what type of service an adviser is offering. How they pay for that service is a separate matter.”

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