View more on these topics

Industry has come full circle

What&#39s it all been about, then? The regulatory about-turn over polarisation certainly prompts me to wonder whether anything has been achieved as

a result of the mountain of

rules and regulations heaped on financial advisers since

I first became a financial journalist back in 1978.

At that time, the Insurance Brokers&#39 Registration Act was coming into force and the Financial Services Act was still around eight years away.

In 23 years of writing about the industry&#39s affairs, hardly a month has gone by without a consultative document landing on my desk, a new consumer protection rule being introduced or a code of conduct being changed.

Yet, while the regulatory environment has become ever more concerned with the minutiae of running a financial services business, the scale of the financial disasters that have actually hit the public has become bigger.

A bureaucratic obsession with small print failed to prevent the pension missell-

ing fiasco or the Equitable

Life debacle.

My seven years as a consumer watchdog on the Sunday Times Money pages, investigating harrowing stories

of incompetence and corp-

orate greed, certainly strengthened my appreciation of the need for adequate consumer protection – and money management education.

But the constant legislative changes forced on the financial services sector have only served to exasperate me. As soon as the public has begun to understand how a system works – giving some hope of consumer protection – the regulators (including the Inland Revenue) have changed things yet again.

The scrapping of polarisation is simply the latest in a long line of moved goalposts. Just as the general public was getting to understand what independent advice was all about, so the bureaucrats have come along to snatch it away. It was the same story, of course, with Peps and Tessas – transmogrified into the Isa just when they were beginning to be understood.

What makes me particularly angry about the proposed scrapping of polaris-

ation is that, in the need to adapt, the industry has been forced to spend a huge amount of resources over 15 years –

for what?

I get a strong sense of

d…jˆ vu. Back in 1978, when

I was editing a journal called Policyholder, the life insurance industry consisted of agents tied to a single company, firms that had agency agreements with various companies and a small minority of truly independent intermediaries. In other words, we have now come full circle.

I cannot help but feel that those intermediaries that choose to continue to follow the “IFA” route this time around might find themselves in the same position as those insurance intermediaries

who opted to sign up with the Insurance Brokers Registration Council back in the 1970s and 1980s.

This entitled them to call themselves “insurance brokers” – but IBRC members (all of which had to offer independent advice) soon discovered that this costly route held few benefits when the general public had no idea what separated an “insurance broker” from

an “insurance consultant”.

The question now is whe-ther the public will ever learn to differentiate between an IFA and whatever the new “distributor” firms choose to call themselves. Probably, most people will not bother to try.

There is an old adage that life insurance is sold, not bought. Much the same goes for all packaged investment products although, with the development of direct mar-

keting, sales techniques have become much more soph-

isticated than they were 20 years ago.

The fact is that only a tiny minority of investors will choose to pay an up-front fee for the privilege of going to somebody who wants to call himself an “independent financial adviser”.

What&#39s more, whereas it was (just about) possible for a journalist to explain in one paragraph the difference between a tied agent and an independent adviser, it will be far more difficult to explain the proposed range of alternative distribution methods.

The FSA argues that consumer education is paramount, yet it is seeking to introduce a system so complex that the public will struggle ever to understand it.

All that said, I fear that in practice the great trek to the poles was bound to end up where it started. In an article in Money Marketing&#39s millennium edition, I explained why I felt forced to back a horse called multi-tie.

The reason was simple – the economic argument would ultimately win the day, with the bigger outlets persuading the authorities that special deals with a limited number of suppliers were in the consumers&#39 interest.

Perhaps Government ministers and regulators should take a course in chaos theory. This tells us that the more complex the system, the more unpredictable its results – and I believe that, as regards protecting investors, these results may indeed be exactly the opposite of what the Government intends.

Let us have a movement against complexity within financial services. Or, as another old adage puts it: Keep it simple, stupid.

Roger Anderson was the founding editor of Money Marketing. In conjunction with Centaur Communications, he is launching headlinemoney – a website specifically aimed at providing ind- ustry information to personal finance journalists (email roger.anderson@headline


NU, Friends and Widows in £26m Assureweb stake

Norwich Union, Friends Provident and Scottish Widows are taking a 40 per cent stake in Misys-owned Assuresoft to inject £26m into its Assure-web IFA portal.Misys says the cash boost is the only way it can achieve an effective end-to-end proposition for online trading and servicing. But the deal has sparked fears that the firms could […]

Investec enters high yield market

Investec Asset Management has introduced the Investec monthly high income fund, its first high yielding corporate bond fund for UK investors.The fund aims to generate monthly income, currently at the rate of 9.75 per cent a year, by investing in a mixture of UK and European corporate bonds. It will hold a high proportion of […]

Fund offers for the Isa season

First State Investments is to offer a 0.5 per cent discount on all investments of £5,000 into its British mid-cap fund. The discount will run from the fund&#39s launch on February 11 until the end of the tax year and will reduce the initial charge to 3.5 per cent from 4 per cent. Annual management […]

Lenders clash over LTV cuts

Halifax has attacked Alliance & Leicester and NatWest for cutting their loan to value criteria in the South-east, claiming it will drive down house prices in expensive areas.The two lenders have lowered the maximum LTV from 95 per cent to 90 per cent over fears that a downturn in the market could cause many borrowers […]

A tough start for 2017 consensus trades

By Kacper Brzezniak Every year, starting around November, investment banks (and fund managers) begin to drip out their outlooks for currencies, rates, economies, you name it, for the following year. The consensus has been largely wrong for the past four or five years; those multiple rate hikes never came, the bond market is still alive […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm