With the general election likely to take place early in the summer – foot and mouth willing – it is interesting to see what the parties have in store for the independent sector.
If it is down to the Treasury, we will soon be heading down the road to depolarisation. However, while New Labour seems predominantly in favour of multi-ties, Social Security Secretary Alistair Darling has on occasions referred to the need for advice on pensions. So, hedging bets as usual?
However, Labour seems to have changed its mind on the value of mutuality although bolting horses and stable doors spring to mind here.
The Tories, meanwhile, have arguably reversed their previous position and come out in favour of multi-ties. It seems only the Liberal Democrats can save polarisation as we know it. So, not a lot of hope then, unless the LibDem stronghold in the South-west sees it secede to set up the republic of Wessex, which will be all right for members of the Bristol IFA fraternity.
Given that the outcome of the election is virtually assured, it is odds-on that depolarisation in some form is the future.
As we know, the Treasury's view is that advice is not a necessity for all savings products and stakeholder can be bought off the page without any need for advice at all. Of course, Treasury economic secretary Melanie Johnson believes the same about mortgages.
Yet several junior ministers have been reported espousing the virtues of Catmarking. Isn't that giving advice? But how can they be sure that Catmarked products are the best in every case? Most Catmarked equity Isas are trackers, which is not necessarily a great piece of advice when the markets are volatile. Will the Government be prepared to carry the can and compensate consumers who misbuy?
Similarly, just because stakeholder is a Government-controlled product does not mean it will fit all circumstances. Decision trees are not the answer nor is the Government's aim to boost distribution with limited bank multities. Can you imagine a bank salesforce referring buyers elsewhere if there are more suitable products?I do not think so.
The Government is, in effect, experimenting with the distribution of its new pension scheme. Within this overall context, it is interesting to see the changes taking place in the world of direct sales. The legendary Man from the Pru is no more and, a few days after this shock announcement, was joined at the Job Centre by the man from Sun Life Financial of Canada who was told he was too “uneconomic”.
The story is the same all round, with the sale of the Lincoln and Royal & Sun Alliance salesforces as well as Britannic being affected.
Despite many people writing off the independent sector, Money Marketing reported recently that IFA numbers have increased by 29 per cent on the back of the shrinking DSF sector. Certainly, the fallout from DSFs has helped networks such as mine to boost our numbers while at the same time raising all sorts of training issues. Of course, they have arrived in time to face the introduction of multi-ties.
If the DSF is dying, it raises a rather pertinent issue. As we know, the Government is desperate to increase pension saving because it does not want to pick up the tab. It seems to have forgotten the basic rule about our industry – in the main, products are sold, not bought. Pensions, life insurance and savings are all worthy things and everyone should have them but people do not go out and buy them on a whim. Consumers have to be cajoled into doing what is best for them and their family.
The aim should have been to establish a win-win situation by providing a realistic and workable pension product while ensuring distributors get a decent reward. Instead, the DSF sector is shrinking fast and I do not expect the internet, telephone sales and decision trees to solve the long-term pension funding problem.
I agree with those who believe depolarisation is likely to lead to a two-tier system, with true independent advice becoming the domain of high-net-worth clients. Surely this is the opposite of what the Government professes to want? The great unpensioned have the right to decent advice. Without it, take-up of stakeholder is likely to be disappointing.
If the Government does not address the distribution issue, one possible outcome is that it forces its hand on compulsion by making private pensions unsellable.
Steve Kelland is chief executive of Burns-Anderson