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Coalition must be quick to respond on polarisation

With the launch of consultation paper 121 last week, the FSA has drawn a line in the sand, positioning itself very firmly on the side of the abolition of polarisation.

The report went much further than anyone really expected. In addition to polarisation, it has also proposed radical reforms for commission, disclosure and the better than best rules.

The 100-plus page paper, Reforming Polarisation: Making the Markets Work for Consumers, to which responses are due back by April 19, has left many IFAs believing the consultation will be a farce as the FSA fully intends to push ahead with the plans detailed in the paper.

With the regulator talking of having the new system up and running by the end of the year, many IFAs and their representatives are already considering throwing in the towel.

IFA Promotion chief executive David Elms says: “I am always concerned when I am invited to take part in a consultative process and the implementation timescale has already been identified.”

LIA director of public affairs John Ellis says: “The timescale is totally unrealistic. There is so much work to be done in informing consumers and for the industry to prepare itself. We need more time.”

But is it a lost cause or is there still a chance of carrying on the fight?

Even if one concedes that polarisation as we know it is unlikely to continue, as many said on the day the report was published, the devil is in the detail.

It is such a massive paper, with so many different and at times apparently contradictory proposals, that IFAs can still highlight to the FSA some of the problems that would exist in this Utopian world it appears to believe the paper will create.

To that end, Aifa director general Paul Smee is calling on interested parties, including the LIA, IFAP, the ABI and the Consumers&#39 Association,to form a coalition to fight the proposals.

Smee says: “Reversing the tide of this will not happen. What we have got to do is make sure there is still a vibrant IFA sector.”

His argument appears to makes sense. To say there will be no change at all is unrealistic but there will always be those who recognise the value of independent advice and seek it out and, as the market creates a demand, so it will be met.

Smee&#39s call has been met with positive reaction for the most part. The Consumers&#39 Association, IFAP and the LIA are eager to jump on board and refuse to concede any more territory than necessary.

Elms says: “There is obviously common ground between the various bodies. We have to make sure the overlapping areas between us are identified as quickly as possible.”

CA senior policy adviser Mick McAteer says the whole thing smacks of a reversion back to pre-1988 before polarisation ever existed, when regulation was minimal and consumers were nothing more than easy prey to shark-like insurance firms.

Like Smee, McAteer concedes change is imminent but he is still confident the floodgates can be held closed to some degree. He says: “Whatever happens, it has to be a case of damage limitation. My real concern is the structural problems. The big winners are going to be the big banks and insurance companies, certainly not the consumer.”

IFA Kangley Financial Partnerships managing director Geoff Kangley says the coalition should be based from the Aifa council and should literally go through the FSA&#39s report line by line, dissecting every argument made in it.

Kangley, a former member of the PIA&#39s small business practitioners panel, says: “Pol-arisation is a done deal but there are a lot of areas beyond that up for negotiation.”

There is not unanimous agreement, however. At this stage, the ABI refuses to commit itself to joining any coalition, saying it is too early to say what action is appropriate. A spokesman says the trade body, like everyone else, is dissecting CP 121 and does not want to do anything hasty until the situation becomes more clear.

McAteer says this is probably because the ABI has members that will win but also those that will lose out because of the changes. He says big withprofits life offices with deep pockets due to the orphan assets they control will be able to go out and buy distribution but others that attempt to compete on value alone will not fare so well.

The ABI is not alone in not seeing a point in joining a coalition. Former Sofa board member and spokesman Syndaxi Financial Planning principal Robert Reid says it is a waste of time. He says: “I think it is all about a lot of shouting and waving their arms. I don&#39t think any coalition is going to accomplish much.”

Despite Reid&#39s pessimism, there are many in the industry who are determined to continue publicly fighting the FSA&#39s contentious proposals. They argue there is too much at stake simply to throw one&#39s hands up and concede the victory.

Following the publication of its original consultation paper on polarisation in 2000, the proposal to remove Catmarked Isas as well as stakeholder from the regime was discarded, which may hearten those who say the FSA is implacable in its resolve.

As far as timing goes, the FSA is renowned for pushing back dates when it realises it has set itself impossible goals. Look at the publication of this report. It was originally expected in December but was handily delayed as the regulator finalised the details.


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