Research released by the FSA indicates IFAs are doing a better job than tied providers in helping to retain ongoing consumer contributions to financial products.
The fourth annual PIA persistency report shows investors are more likely to continue contributing to products sold to them by IFAs than they are those bought from tied agents.
If this is so, and the regulator's own figures suggest it is, why are the powers that be determined to make it easier for tied agents to sell stakeholder and other contribution-based products?
More importantly, why are they determined to scrap polarisation and hinder the continued success of IFAs?
A number of commentators might take the report as a sign to the regulator to urge more consumers to seek out the professional advice of an IFA.
The report says that four years after purchase of policies through IFAs contributions are still being made to 82 per cent of endowment policies, 65 per cent of personal pensions and 77 per cent of whole-life policies.
For policies through tied agents the figures are 76 per cent for endowments, 58 per cent for pensions and 64 per cent for whole-life plans.
It concludes: “Policies sel ected from the whole of the market by an independent financial adviser have a better chance of meeting the needs of the investor.”
Aifa director general Paul Smee says: “This is further evidence of the better quality advice and products provided by IFAs.
“It makes one wonder why anyone would consider changing the distribution channels when independent advice clearly works so well.”
The FSA has recommen ded to the Treasury that polarisation should be relaxed on stakeholder pensions and Catmarked products, leaving the industry to scratch its head over why the regulator would make such a recommendation when its own numbers prove the value of independent advice.
LIA spokesman John Ellis says: “The regulator is loosening up the system but it must be aware it is making it easier to sell ill-suited products. Those of us who believe in the quality of the advice process have to be saying that the FSA must be careful.”
While IFAs ought to be rejoicing in the fact that yet again evidence has surfaced of the good job they are doing compared with their direct competitors, they are naturally wondering why the FSA is acting as it is on polarisation.
Shropshire-based IFA Gee & Company general manager Jennifer Storrow says: “I'm delighted to read that the FSA is saying IFAs are more effective in the way they sell life and pension products. Given this, it seems crazy they would be thinking about changing polarisation.”
The networks too are finding it difficult to understand the FSA's mentality. Bank hall head of business operations Tony Murrell believes the numbers prove what IFAs have always known: those who get proper advice are going to have a better understanding and therefore be more likely to continue contributing.
Murrell says: “Why are the politicians acting in direct contradiction to what the evidence indicates? Common sense says if a member of the public has the time to sit down with a professional adviser they will have a considerably better understanding of what they are buying and be more likely to continue paying into it.”
According to the authorities, the release of the report does not change anything as far as the polarisation debate goes.
They say despite the value of advice a large number of consumers will continue to go to high-street direct providers and so action must be taken to safeguard their interests.
FSA spokeswoman Jackie Blyth says: “Consumers do go to IFAs and do get good advice. But a lot of less sophisticated people go to tied agents and they need the whole range of products available to them.”
It is more of a socioeconomic argument, they say. They admit those who can afford to seek out IFAs do get good advice and do walk away with a better understanding of the products and do continue to contribute.
A Treasury spokesman says: “There a number of reasons for these findings, including the fact that IFAs and tied providers have a very different client portfolio.
“We have always said that we felt IFAs give good advice. IFAs will continue to trade and advertise their independence, as they have since the rules were introduced.”
Legal & General spokes man John Morgan believes the results of the persistency report are more to do with the type of consumer rather than the inherent value of independent advice.
He says: “IFAs tend to service the upper end of the market, while tied agents do more mass market business. It must be recognised IFAs cannot service all the consumers in the marketplace.
“It's more of a socioeconomic thing rather than a value of advice thing.”
Even if there is some validity to this argument, it seems difficult to say the best end of the market should be potentially damaged to bring up the weak end of it.
The persistency figures have not been spun out of nothing. They appear in black and white in the FSA's own literature.
The FSA is unlikely to be able or willing to explain away their own evidence but in the consultation process on polarisation it may be a piece of evidence it chooses to push to one side.