Many IFAs are failing to offer a genuine fee option under the new depolar-isation regime and risk losing their independent status according to the two biggest IFA trade bodies.Personal Finance Society head of public affairs John Ellis believes the early signs have confirmed his long-held fear that IFAs would be slow to adapt their business models to accommodate fees. He says that although has depolarisation seems to have gone smoothly, the lack of any seismic shift is more likely to mark the failure of the IFA market to adapt their propositions. Ellis says: “Bearing in mind that there are thousands of IFAs, I would have expected a lot more activity after depolarisation. I do not think there is any evidence that depolarisation has made an impact. Many IFAs just do not seem to be listening and, bearing in mind the difficulty that IFAs have had in the past charging fees, this is not a surprise.” Sesame commercial director Charlie Bryant says commission-based IFAs wanting to remain independent have been forced to grapple with complex issues over VAT, the payment menu and clawbacks says. He says: “We have had to provide our members with a huge amount of training to help them understand the fee- based model. I think that many IFAs will say they offer fees but will not be doing what they should be.” Aifa director general Chris Cummings believes that IFAs have adapted well on the whole to depolarisation but say there is still a general lack of awareness of some complexities. He considers that firms are not deliberately passing themselves off as IFAs under the new definition but some are just ticking the fee box and failing to embed it properly in their business. Informed Choice managing director Nick Bamford points to the payment menus that he has seen, with IFAs charging inflated hourly rates, knowing this will put off their customers and lead them to stick with commission. Similar ploys could include presenting fees in an unfavourable light in discussions with clients. Pension Transfer Solutions managing director Carl Melvin believes this is inevitable and says some IFAs will continue to make up fees as they go along and cross their fingers that they avert the gaze of the FSA. But with the FSA repeating its Treating Customers Fairly mantra at every opportunity IFAs could be playing a dangerous game and could find themselves on the wrong end of the regulator’s enforcement division. There is no doubt that the FSA is aware of the potential problem. Speaking at the Institute of Financial Planning conference earlier this year, FSA retail intermediary sector manager Paul Rich revealed that the regulator had received intelligence about the potential for poor practice with firms offering small contingent fees and then raising them greatly. This, he said, represented “a scare tactic to drive the client to commission and not a genuine fee option”. An FSA spokeswoman commented recently that any IFA that had failed to embed a fee-charging structure in its business plan was patently not treating its customers fairly. Ellis for one believes that many IFAs will be found out, leading to a significant decline in the numbers of IFAs. He says he always had a hunch that many IFAs would fail to qualify as IFAs after depolarisation and would be forced to take the whole of market adviser route. He also believes that depolarisation has brought confusion in the market and warns that we could be faced with an amorphous mass of distributors a few years down the line. But Tenet group sales and marketing director Keith Richards wonders what all the fuss is about. He argues that most IFAs previously offered a choice of commission and fees, so things have not really changed. He also believes that blame is being laid unfairly at the door of the IFA community and that it is a misapprehension to say that IFAs are unwilling or unable to charge fees. He says: “What drives many IFAs is the type of clients they service. Even though an IFA may offer a choice of fees and commission they may have a client base that leans towards commission.” Cummings says the feedback that he has received from Aifa members shows that most them seem to be keen to keep their independence although there are many who see no benefit in depolarisation for their clients and have reluctantly sacrificed the independent tag. The outcome of Aifa’s consultation with its members about who should be allowed to join the trade body may provide the strongest indication yet on where the market is heading.