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No need for IFAs to panic

DBS Management chairman Ken Davy on why the Treasury and the FSA have got it wrong

In the TV comedy Dad&#39s Army, Corporal Jones could always be relied upon to panic at the slightest event.

His cries of “Don&#39t panic, don&#39t panic” were a sign that something was not quite as it should be rather than a signal that it was wrist-slashing time.

Fundamental contradiction

It was with these sentiments in mind that I turned the pages of the FSA&#39s longawaited press release on polarisation headlined: &#39FSA says fundamental change to polarisation will benefit consumers and the industry&#39 (what you might call a fundamental contradiction in terms if ever there was one).

Innocuous changes

In reality, the document did not live up to its Draconian headline.

Despite it including a lot of sabre rattling and speculative comments about what might be done in the future, it only promised some relatively innocuous changes which it wants to see brought in early next year, with further consultation being planned for the wider issues.

Not mainstream

In essence, the two main changes proposed would give tied agents the ability to sell other companies&#39 Catmarked Isas and stakeholder.

While I am sure this is something the banks will try to capitalise on, it holds no threat to IFAs as, rather like National Savings and, of course, the Tessa market a few years ago, it is knowledge we need to keep in mind on behalf of clients but it is not part of our mainstream marketplace.

Damaging to the consumer

Having put the FSA&#39s statement into perspective, however, let me now comment more robustly from the consumer&#39s point of view.

In my view, the Gov ernment is sacrificing the best interests of the consumer on the altar of stakeholder and Catmarks.

Also. the way in which execution-only purchasers forego virtually all their consumer rights and protections have been ignored.

The banks, of course, and certain insurance companies will love the changes and yet the regulator&#39s own research shows these are already the sales channels that have the worst persistency records and generate the most complaints from consumers.

Weakening polarisation can only damage the consu mers&#39 position further.

Advised client benefits

It seems to me the cost of adv ice is a small price to pay for the certainty of satisfaction.

As advised client benefits from this assurance because if he or she is badly advised, the full protection of the law and regulation is there to ensure proper compensation.

Not so the execution-only customer, as in law it is ent irely his fault for buying the product in the first place.

These changes to polarisation may result in a few extra consumers buying an Isa or stakeholder (and it will only be a few) but unfortunately it is going to be consumers in general who end up paying the price in the form of more confusion and less protection.

The answer for consumers is, of course, for them to ensure they continue to insist on independent advice.

I believe the Government and the FSA have got this issue completely wrong and they and the consumers&#39 interests are indeed Poles Apart.


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