Legal & General group executive director Kate Avery has called for greater clarification of the relationship between advisers and product providers when a provider owns or has a stake in a distributor.
Speaking at a Centre for Future Studies event in London, Avery said recent market developments have led to worries about the relationship between the provider and adviser in these situations.
She said FSA concerns are likely to lead to a greater clarity being demanded over the relationships between providers and distributors in terms of ownership to ensure there is no consumer detriment.
L&G does not own or have stakes in any IFA or multi-tie firm, but competitors, including Axa, Standard Life, Aegon, Skandia, Friends Provident and Norwich Union, all have stakes in or wholly own distributors.
Avery said: “There does need to be a greater clarity in this area. What is the infrastructure when a provider owns an IFA? An increased clarity of the roles is required.”
She also told delegates that L&G, and other providers, had been wrong about the way the market would develop after depolarisation and underestimated the resilience of IFAs.
She said it is striking how dominant the IFA sector remains and conceded that, from a provider’s point of view, multi-ties had not been as successful as they would have wanted.
Avery admitted that L&G’s projections had underestimated the value that advisers give to the term independent as a differentiator.
She told the meeting that consolidation has not been provider-led, as L&G had predicted, but has happened because of increased regulatory capital requirements.
Avery said she would give depolarisation a score of four out of 10, saying the move had not benefited consumers or driven down commission through the payment menu.
Looking ahead, Avery predicted a greater separation of fee-based and product-focused advisers, regulatory incentives for adviser firms to consolidate and the growth of platforms changing industry profit dynamics.