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Outside Edge

House price inflation is peanuts. Insurance salesperson inflation is the new hot ticket. Five life companies have clubbed together with other investors to buy 18 per cent of a business (Millfield Partnership) that lost over £7m on a turnover of just over £20.5m last time around. The price appears to value each adviser at £251,462.

Aviva says that it has spent £38m on such ventures so far. Aegon has not disclosed the price tag on the Wentworth Rose deal.

There is more to come. The race is on. Product providers are investing in distribution ahead of the upheaval that everyone anticipates will follow the changes to the regulation of distribution.

Polarisation was doomed at birth. The Office of Fair Trading never liked it, some of the big banks and fund managers positively hated it, no one else in the world organised their market in this way and HM Treasury had it in for the then Conservative regime. CP121 confirms the death sentence. Unhappily, it does not actually tell us much about the afterlife.

Tim Henman has lost a semi-final at Wimbledon, so it must be summer. We were promised draft rules in the summer. Word is that those draft rules will not now appear until the autumn, by which time we could still be digesting Sandler, Pickering, new rules on disclosure and yet another FSA paper on lower-income consumers.

The defined-payment agreement – the condition proposed for retention of the designation “independent” – is quite clever. It would force IFAs to make it clear to clients that they are paying the IFA for the IFA&#39s advice. The heat generated by the proposal leads only to a suspicion that lots of IFAs must still be peddling the line about their service being free.

A provider could own one of these “real” IFAs and it is suggested that the better than best rule will be superfluous because the IFA will not be influenced by commission. An IFA disclosing that he or she is financed by Scottish Widows, but that the recommendation of a Widows product is pure coincidence, may struggle to pass the sniff test, so I doubt this one will reach the rules in this form.

CP121 proposes an escape route for the IFAs and their clients who are wedded to commission. Delete “independent”, insert “authorised” and carry on. A provider could own one of these but the inference is that, because it would earn commission, better than best would still apply. I do not know a living soul who thinks that this proposal will survive.

The multi-tied firm would, says CP121 in a rare excursion into the important details, be directly regulated.

Could a firm take an office block and then single-tie on the ground floor, multi-tie on the first, trade as an AFA on the second and an IFA on the third? Could advisers move between the floors, depending on where the client wanted to shop? Could the multi-tied arm continue to advise on products that were sold when it was an IFA?

Would the regulator be concerned with the terms of the contracts between the multi-tied firm and the product providers?

Pass, pass, pass and pass. So, given the confusion and uncertainty, why are the life companies making these investments? They are afraid of being left without the means to distribute their products.

Way back in 1988, Camifa fell apart. The life companies, afraid of having no distribution, went out and bought some. A few people got rich quick. A lot of life companies learned painful and expensive lessons. Déjà vu?

Graeme Laws is the former deputy managing director of National Mutual


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Fit for Work: guidance for employers published

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