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Hammer home the independent message

The outcome of the investigation into pol arisation is questionable to say the least. What is difficult to understand is that we are told we have a listening Government that positions itself as the people&#39s champion. Yet, quite evidently, consumer concerns have been overridden by the politics of the day.

We are now seeing a scen ario where the Govern ment&#39s long-term pension pol icy is reliant on stakehol der provision and a desperate need to distribute these new policies. With a 1 per cent margin, we all know that cost-effective distribution will be a massive challenge, particularly as emp loyers in many cases will not contribute to such sch emes nor pay any adviser fees.

Now multi-ties are being proposed as the solution, with the buyer supposedly prot ec ted through the 1 per cent charging structure. However, as all advisers are aware, there is more to advice than charges alone. Investment perform ance, scheme design and service all have to be considered by the buyer.

There are two key issues that now need to be addressed by our industry:


Retail buyers are even today often unaware of the differences between IFAs and tied agents. With multi-tied agents, we will see even more confusion, with buyers feeling that they are receiving independent advice from tied agents.

Let us not forget that to choose a partner as a tied agent will not be subject to best or appropriate advice. These deals will be done in the boardrooms of corporate UK, looking at issues such as distribution and competing product areas.


Going multi-tied will be a boost to many tied sales off ices and this will almost certainly bring further con solidation in the marketplace. In the long term, this will lead to even less consumer choice.

The effect of the multi-tie will be felt particularly in the retail sector and by companies advi sing smaller employers. Most advisers to big corporations and those dealing with high-net-worth clients are likely to be less affected. That said, the move tow ards multi-ties means every professional IFA business in the UK now needs to address how it plans to protect its exis ting client base as well as att ract new corporate and ind ivi dual clients.

Central to any firm&#39s marketing and business development strategy must be the clear and tangible benefits that independent financial advice does clearly offer. Aifa and IFA Pro mo tion have imp or tant roles to play but, ultim ately, it is down to every IFA bus iness to set out its own uni que value proposition vigorously.

FSA chairman Sir Howard Davies states: “We will enh ance the disclosure rules so that consumers&#39 understanding of the role of advisers and salespeople and the products they sell keeps pace with market changes.”

When all is said and done, independence is about client choice. We all know consu mers must be offered real choice by their advisers. This ruling on polarisation, therefore, rai ses a serious point as the IFA must be able to demonstrate choice. This brings into focus the whole question of panel selection. What, for example, is the difference between an IFA which has a limited selection of products on its panel and a multi-tied salesforce?

In the corporate marketplace, the IFA must offer the client access to advice and service through an integrated model of face to face, telephone and internet advice. Generally speaking, the corpor ate buyer recognises the real value of independence but, in a market that will become more competitive, the value that the client places on this aspect must be reinforced by the benefits of the ongoing service that the IFA can provide.

Plainly speaking, when com peting against product providers, which are not gener ally renowned for their service excellence, the issue of service should offer a clear opportun ity for the IFA to show value.

Positioning truly independent financial advice as a tangible employee benefit which can actually enhance the benefits package that the emplo yer provides is an obvious but crucial way of clearly establis hing the value that the IFA can provide. In turn, this could mean the IFA entering into partnership with complementary service providers which, as a package, offer the emplo yer and subsequently employees a rounded offering that inc orporates, for example, share dealing and tax advice.

It is the individual sector where the consumer is less likely to understand the differ ence between multi-tie and independence and where com pe tition will be extremely int ense. As with corporate cli ents, choice of access and ongoing service need to be clear differentiators. This should be coupled with the benefits of independent advice which, ref lecting on a theme mentioned earlier, should lead to greater openness and clarity around panel selection.

The combination of choice and service coupled with the pressure on margins means the relationship between con sumer, product provider and IFA has to operate on a tripartite basis, with the focus on del ivering what the consumer wants.

There is no question that there will continue to be a need for quality, profe ssional independent financial advice. Yes, the proposed chan ges fly in the face of common sense and IFAs must clearly demonstrate the benefits of independence and create a real distinction and choice for the consumer.

But those who are doing this already should only see their position strengthened.

PAUL JOHNSTON Managing director, Momentum

Financial Services


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