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It&#39s all or nothing for polarisation

A Treasury official has told the financial services industry that changes

to polarisation will be all or nothing, saying the only two options are the

status quo or scrapping the existing regime.

Questioned at a London conference this week, Treasury policy adviser Keith

Davis told delegates: “There are two options – to go no further with

changes or wholesale reform of the polarisation regime.”

But the debate has been complicated further with FSA head of business

conduct David Severn warning product providers not to count their chickens

on the outcome of the polarisation review, saying they may find themselves

worse off by acting on speculation.

But the odds shortened on the likelihood of change as Money Marketing this

week learnt that consultancy Charles River Associates, whose foun-ders

split from the now defunct consultancy London Economics, is working for the

FSA on phase two of the review.

London Economics was responsible for the polarisation report in 2000 which

recommended changes across the board to polarisation. CRA is now looking at

how the volumes of sales products are affected by commission levels – a

move that appears to stray into the Sandler review&#39s territory.

Davis described the second stage of looking at polarisation as the FSA&#39s

second bite at the cherry and that no further change is an option.

He hinted that the FSA would publish its phase two research in September

with a discussion or consultation paper before Christmas and a full debate

in the new year.

Severn says: “If we knew today that polarisation was done for, we would

not be hanging around until the end of the year to release a consultation

paper.

“Firms could be left at a disadvantage if the outcome they choose is not

the correct one. Things might turn out totally different from people&#39s

assumptions.”

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