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Has Severn called time on multi-ties?

The FSA&#39s perceived determination to introduce multi-ties and end polarisation appears to be softening. Despite the long-held belief within the industry that it is only a matter of time until polarisation is fundamentally altered, if not scrapped, delegates at the recent FSA open meeting walked away with a drastically different mindset.

Not only did FSA head of conduct of business policy David Severn no longer appear to be favouring multi-ties but he seemed to be saying that a gap-filling scenario has merit.

Severn, also the head of the polarisation review team, outlined the four possible options for change to the delegates. They are retaining the status quo, complete abolition of polarisation, allowing multi-ties or extending gap-filling to encompass more products than just stakeholder pensions.

Norwich Union sales and marketing director Peter Hales says: “David Severn appeared to cast doubt on multi-ties, saying they might result in migration away from the IFA sector. I am surprised the FSA is coming to this conclusion at such a late stage.”

Severn told delegates there must be doubts as to how consumers would benefit if the only result of change was IFAs fleeing the sector to become multi-tied. He also said, if polarisation were to be scrapped, the result would be a need to replace it with a new series of regulations.

Hardly the remarks one would imagine hearing from a key figure in a regime apparently committed to scrapping polarisation. If there is some degree of back-pedalling going on, then the industry will be speculating over the reasons. Some claim it is because market forces such as stakeholder pensions are accelerating the problems by putting pressure on the capitalisation of IFA firms. This would make IFA firms more likely to consider becoming multi-tied if the price was right.

Clerical Medical head of strategic marketing David Shelton says: “The financial position of IFAs has deteriorated through the introduction of stakeholder and there are a lot facing short-term financial pressure.

“This means they have been looking seriously at multi-ties. It is no longer the case that multi-ties would not affect IFA businesses because a number of IFAs would go down that route. It is encouraging the FSA has taken note of rapidly changing circumstances.”

Others point to the fact that the Treasury is no longer exerting pressure on the FSA to introduce multi-ties.

Informed Choice managing director Nick Bamford says: “It seems reality is kicking in. But the question is, who has the final say? The FSA has to do what the Treasury wants and, if it wants multi-ties, the FSA will probably have to come into line. So the battle is not yet won and the negative attributes of diluting polarisation still have to be pointed out.”

Whatever interpretation one wants to make of Severn&#39s comments, some product providers emphasise that no decision has yet been made. They say the four options are still very much on the table and it is too early to start drawing conclusions.

Aegon corporate development director Laurie Edmans says: “It is clear the FSA does not want people to jump to conclusions. It does not now mean the pendulum has swung the other way. All options are still on the table and everything is still there to play for.”

It is interesting to see the different impressions that delegates walked away with from the same meeting. AMP, which it is thought would be one of the companies most affected by any decision not to move ahead with multi-ties, given its recent purchase of national IFA Towry Law, said it did not get any impression about which way the FSA was leaning. Zurich has a similar understanding.

Nevertheless, renewed speculation about the eventual outcome of the FSA review will probably lead many to reconsider their own positions in the marketplace.

While many companies were acting on the assumption that multi-ties would be the outcome, Severn&#39s comments make it that much more difficult to make a move. Perhaps that was his intention the entire time, sending a warning shot to the industry that it cannot afford to guess this one wrong.

If that is the case, the FSA would do well to heed its own warning. If it pushes ahead with one option and ends up damaging the industry and consumers, it will be very difficult to revisit the distribution arrangements any time soon.

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