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Money Marketing: Faith, hope and clarity

With most of the industry representatives indicating some amendment to the polarisation regime is likely to happen, white labelling or gap-filling appears to be in pole position.

This does not mean change is inevitable because when it comes down to the nitty-gritty it may prove too difficult to change the regime when the regulator has so much else on its hands.

But if the recommendation is to be white labelling or gap-filling, a lot of questions must be asked about what this means.

If one of the greatest strengths of polarisation is its clarity, any replacement must be clearly defined. This clarity must not only be provided by the Treasury and the FSA but also strictly enforced on the ground.

But there are already many problems with defining the new concept. First there are – probably – significant differences between gap-filling and white labelling. The former suggests tied advisers can fill the gaps in their ranges with products from other firms but with clear labelling to say it is from another provider. White labelling would suggest the firm attaches its own label to a product which is “manufactured” elsewhere.

The industry has yet to make it absolutely clear which of these two alternatives it favours. Both offer tied advisers increased flexibility. But without a tight regime both, and in particular gap-filling, have the potential to allow the tied adviser to “pass themselves off” as an IFA that can offer products from a whole spread of the market. Mystery shopping exercises over the next few years will make fascinating reading if this change is implemented.

There is also no indication whether either white labelling or gap-filling will allow a multi-product tie. This appears to offer many of the benefits of a multi-tie to a tied adviser but under the regulatory shield of a “lead provider”. We remain concerned this is little short of a multi-tie in that the tied adviser is not just using gap-filling or white labelling to fill in weaknesses in their ranges because the tied provider does not stock products but would be given a much more extensive choice of product providers.

The basis of how the multi-product tied business stacks its shelves will need to be very clearly defined. What role does the lead provider have commercially in the midst of all this? Does it get involved in negotiations over commission? If this is the case, how does this affect the broker&#39s remuneration?

Perhaps the regulator is thrashing out these issues as we speak but the cynical way in which London Economics report has been used to cajole IFA representatives into suggesting some changes or be cast as little more than Neanderthals does not give us great cause for hope.

Perhaps the best conclusion to be hoped for is that the FSA with a brand new pension, imminent mortgage regulation and a brief to prevent – or at least minimise – any new scandals finds it has too much on its hands and delays any decision for the next few years.


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