Who am I to argue with the key objective the FSA has set itself for the short-term changes to polarisation proposed in CP80 to secure greater access to and choice of good value products for consumers?
The $64,000 question is, will the proposals work? Or will they – as so much legislation and regulation always seems to – have outcomes entirely unexpected by the well meaning and usually very clever people who promote them?
Let's start by giving some credit where credit is due.
First, the FSA itself appears to have no great expectations. Both cost and benefit of the first-stage changes to polarisation are assessed as “small” by the FSA's own cost-benefit analysis.
I cannot resist the temptation to ask, why bother, given what many of us perceive as the risk of damage to consumer understanding by fiddling around with polarisation.
Second, both London Economics and the FSA have recognised that to the extent that polarisation constrains competition it does so solely in the tied sector, not in the IFA market.
Even though we may believe in the credo, if it ain't broke, don't fix it, it is important to recognise that these short-term changes to polarisation have almost no impact at all on the IFA market. In fact, CP80 mentions IFAs almost not at all.
What significant market activity have we seen since CP80 was published?
A couple more direct salesforces have gone to the wall, so no change there, then. Clearly, whatever dire predictions many IFAs may make about the impact of these changes, those running DSFs see it differently.
They seem to realise that whatever threat multi-ties or some other weakening of polarisation may represent to IFAs, it sure as hell does not present them with a panacea for the challenges of making a success of running a DSF.
Are they wrong? If I were running a DSF, I am not sure I would regard allowing my salespeople to sell the Catmarked products of other providers as such a wonderful opportunity, unless, of course, I wanted to enable them to present themselves to unsuspecting prospects as independent….allegedly.
Whatever feelings of schadenfreude IFAs may have each time a DSF goes to the wall, there is no doubt that it has the effect of reducing customer access to advice.
The really significant moves have been on the bancassurance front – L&G's deals with Barclays and Alliance & Leicester.
Let's apply the FSA's tests. First, do these L&G deals increase customer choice? Well, I would really like somebody to explain to me how Barclays ditching Barclays Life et al and similarly A&L canning their financial services arms so they can all sell L&G products increases customer choice.
So far as I can see, it does precisely the opposite.
Neither Barclays nor Alliance & Leicester intends to take advantage of the CP80 proposals to sell somebody else's products alongside L&G.
Second, do they secure greater customer access to good-value products? I do not think we have enough data to answer that yet and L&G and its new friends have been deathly silent about the terms of their deals.
My spies tell me that some of the poor-value TSB life products were simply rebranded Scottish Widows following the takeover…allegedly.
One final point on CP80 – the proposals for direct offer. I have been trying to get my brain around the implications for IFAs for products sold by direct offer being entirely removed from the polarisation regime. I will do some more research and share my conclusions with you another week.
Tony Kempster is a former chief executive of DBS