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moore&#39s code

Panic. It&#39s the end of the earth. Millions of people will be ripped off. The friendly local independent financial adviser who has helped so many to a healthy, wealthy retirement is no more, thanks to that nasty man at number 11 Downing Street.

Well, maybe. The Gov ernment and FSA have certainly between them opened a Pandora&#39s Box with their decision to consign polarisation to the scrapheap.

But, while I suspect half the IFAs out there would like to lynch me for saying this, there is a certain logic to the step taken so far.

Stringent limitations on price make Catmarked Isas and stakeholders very similar to each other. Like it or not, there is much less value to be added by IFAs&#39 theoretical role of searching across the entire market for the best example of these heavily regulated products.

Have the networks not tacitly recognised this anyway? All the Government would need to do to justify its plans is look at some of their stakeholder panels.

As for some of the panels used by national IFAs, step forward Bradford & Bingley. The ones I have seen from previous years make a complete mockery of the spirit of polarisation anyway, even if the FSA has decided there is nothing there that actually breaks the rules.

IFAs have not always been well served by some of the market&#39s biggest players in this debate. If ever the Gov ernment needed a justification for what it has done, it has it there.

But if that sounds like I am giving the proposals by Gov ernment and the FSA a ringing endorsement, that is not the case.

I can live with what is on the table, which is more about gap-filling and extending the distribution of a tightly regulated product than anything else. I doubt there will be any problems caused by the “new” method of stakeholder distribution – the real concern is always whether it is worth saving for one with the minimum income guarantee in place. I pity the poor adviser, tied, multi-tied or independent, who has to wrestle with that one.

It is the proposals to ext end the “liberalisation” of distribution that should really be causing concern. As I have already pointed out, some of the panels I have seen suggest that multi-ties have been a reality for some time. But that does not necessarily make it right.

All the research shows that a large section of the public does not really understand the difference between tied and independent advice. That is not necessarily a reason to give up on it.

I hope this consultation really means there will be consultation and the views of the industry are heard. When even the ABI expresses reservations, and, remember, some of its members might quite like a multi-tied situation, it speaks volumes.

The potential for abuse is real. For example, multitied advisers making themselves out to be genuinely independent when they are not. Also, life offices bribing the multi-ties with incentives, increased commission and the like as they scramble for new business.

Strengthening status disclosure is all very well in theory but what about in practice? The current regime has done much to improve the way this industry operates, and heaven knows it needed it, but it has not been an unqualified success. You can disclose as much as you want to a client but, if they do not understand what they are being told or simply do not read the reasons-why letters, for example, it does not do a lot of good.

The sort of commission with-profits bonds and inc ome-drawdown plans are paying have been a cause for concern for some time.

If this commission is prompting poor advice now, and I suspect it is, the potential for abuses if polarisation is relaxed is a great deal worse.

What is being proposed, and there are a number of options on the table, will need wholesale rule changes, a lot of thought and a lot of listening. The latter is the most important part.

There is one final point to make. If the Government really wants to encourage fee-based financial advice, and I am firmly of the belief that fee-based advisers are the way forward, then there is a simple measure it could take – get rid of VAT on fee-based financial advice.

It will hardly cost a lot of money because so little fin-ancial advice is fee-based at the moment.

But taking this measure would remove one of the principal objections many people have to paying fees.

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