There have been a couple of occasions when I have been scratching my head trying to think of a topic to write about for this column – not this time.
Of all the hot potatoes around at the moment, as an IFA it is hard to get away from CP121 as a subject for comment, so I will not try.
Many in the IFA community do not welcome the proposals. About three-quarters see no positive aspects at all and would be happy to leave things as they are. I sit with the lonely but I believe in the growing minority who actually agree in principle to a reform of polarisation. That is not to say that I am happy with everything in the consultation paper.
One of the key objectives of reform of polarisation, providing wider choice to consumers, is highly laudable. Action to try to bring this about is not only welcome but necessary.
Although we have 55 per cent of the market share by volume of business, we have only 20 per cent by number of individuals (which says a great deal about the benefits of independent financial advice). The remaining 80 per cent are getting advice on financial products where the range is at the least limited and at worse very poor value.
Ideally, people should shop around for advice but evidence suggests that they are not going to. In that situation, is it not better that they at least get access to a wider range of financial products?
It is logical and reasonable, in principle, for the multi-tie route to offer more and better products and thus benefit the consumer. However, in practice I am not confident that this will be the case.
It is clear that there has already been a significant amount of lobbying from the bancassurers and, if proposals are implemented as they stand now, they will be the greatest winners. Banks are not known for their altruism. I do not believe they will be running out to forge links with the great and the good among providers. Rather they will be looking for the most commercially attractive link-ups they can find.
Not only might this compromise choice but it could also increase costs. And I do not believe it will just be the banks that will be guilty of putting commercial interests before the interest of the consumer. Just look back at what happened after the abolition of the maximum commission agreement. There seems very little concern about this, which does appear to demonstrate a particular naivety. In saying that I still feel that, overall, multi-ties will be better than the status quo.
An area of CP121 that I am against is one I think almost all of you will agree with me about – a defined-payment system for IFAs. Even though it would not pose a problem for Fiona Price & Partners, it is unworkable for the vast majority of IFAs.
The introduction of such a system would inevitably and very swiftly lead to shrinkage of the market and force many IFAs down the multi-tie route. This in turn will mean a reduction in consumer choice and therefore be in direct contradiction to the aims of depolarisation. I do not think it was the intention to force businesses to adopt lower standards of service for commercial reasons.
I do hope there is a rethink on this. The view that the defined-payment system may be anti-competitive does give me some cause for optimism. Personally, I feel that it is so fundamentally flawed in so many respects that it should be dropped completely.
There are many other flaws in the proposals, not least of which are the proposed timescales for their introduction. And the regulatory black hole that could be created by the unbundling of the cost of advice and the cost of the product – which could leave many consumers without protection – seems so glaringly obvious that I am surprised it was missed.
But perhaps it was a deliberate omission as the powers that be are finally looking upon us with kindness and have decided to grant us freedom from the ever-burgeoning regulatory burden under which we are sinking.
Donna Bradshaw is communications director at Fiona Price & Partners