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Churning fears as FSA reveals multi-ties face losing clients

Multi-tied advisers will have to relinquish their existing clients with products outside their ties to IFAs or become tied to the entire market, says the FSA.

The regulator&#39s stance should substantially increase the number of IFAs opting merely to change their title to distributor but remain free to provide advice on the entire market.

Such a move would also allow advisers to continue to receive commission, easing fears they would have to switch to a defined-payment system. Alternatively, some may choose to split their business into multi-tied and IFA channels.

But some industry commentators question the ability of advisers to multi-tie to the entire marketplace, believing some providers may set minimum business levels for ties if they are permitted to do so by the regulator.

This has prompted fears that depolarisation could open the door to churning, where some new multi-tied advisers revisit their client banks.

ProAct Legal partner Gareth Fatchett says: “This will be a churners&#39 charter. If you become multi-tied, your entire motivation will change from being client-focused to company-focused. Advisers receiving trail will have to go back and renegotiate with all their clients.”

An FSA spokeswoman says: “A multi-tied adviser would not be able to advise on a client&#39s pre-existing policies with companies outside the ties. They would have to refer on to an IFA. But it is worth bearing in mind that you could multi-tie to the whole market. We take a very dim view of churning and monitor through routine visits and tip-offs from fellow advisers and providers.

“Whether providers will be able to set minimum amounts of business for multi-tie agreements is commercial nittygritty that will come out in the consultation process.”

Kangley Financial Planning managing director Geoff Kangley says: “It is all very well for the FSA to say that you can multi-tie to the entire market but if providers are allo-wed to stipulate minimum amounts of business, this would skewer best advice. There is the same danger of churning as when a tied salesman changes company.”

Polarisation, pages 2,3,9,10,12,16,18

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