View more on these topics

OUTSIDE EDGE TONY KEMPSTER

It is a truism in every walk of life that all new regulation or legislation always has unexpected outcomes, often dramatically so.

My favourite example of this is the prediction of the OFT back in 1987 that if polarisation were allowed to be implem ented, then it would destroy the market for independent financial advice.

With that salutary lesson in mind, let&#39s look at what the FSA is trying to achieve with its review of polarisation and, in particular, with the short-term changes that are out for consultation in CP80.

CP80 proposes the depolarisation of Catmarked products and stakeholder pensions and for all products for directoffer business.

So, a new phrase has ent ered our language – adopted products. This is the code for the products that tied agents will be able to sell from outside their current marketing group.

The FSA press release says it is aiming to achieve four objectives with these changes:

1. Secure greater access to, and choice of, good value products for consumers.

2. Remove regulatory barriers which may impede com petition and innovation unnecessarily.

3. Clarify the status of authorised firms for consumers.

4. Clarify where responsibility lies for complaints and redress.

The second objective seems to me little more than a nod at the Treasury and the OFT. The extent to which the FSA will have to invent new rules to prevent consumer detriment from proposals means the barriers will be raised, not removed.

Turning to the third objective, I have real difficulty in understanding how the status of advisers can be clarified by the introduction of adopted products which tied agents will be allowed to sell.

The FSA makes great play of the London Economics&#39 statistic that says 20 per cent of clients do not understand the status of their adviser, hence polarisation does not deliver clarity. To my way of thinking, the fact that 80 per cent do understand is an endorsement of polarisation as having delivered very considerable clarity.

The fourth objective is doomed from the start and is an area where the FSA really should reconsider. The proposal in CP80 is that the tied agent&#39s host office should be responsible for the advice given about adopted products but the company supplying the product should be responsible for the product terms and the admin around servicing its policyholder.

It sounds like a recipe for disaster to me. The FSA indulges in some wishful thinking elsewhere in the CP where it says: “The firm that sold the product is then responsible for ensuring the complaint is handled either by itself or the firm that issued the product, dep ending on the nature of the complaint.” Oh, that&#39s all right then.

When investment performance is crap, is that the fault of the adviser or the investment manager? Think carefully bef ore you answer.

The FSA has already signalled its unhappiness with the propensity of some senior managers to abdicate respon sibility where they have outsourced key elements of their operations to third parties. Barclays has effectively outsourced its entire packaged products operation to Legal & General.

The FSA should make Barclays&#39 senior management just as individually respon sible for L&G&#39s performance as they would if Barclays had bought L&G. That would focus minds.

I have left the first objective until last because it is the only real objective. The rest are risk or PR to varying deg rees. But my evaluation of the FSA&#39s ability to predict the future will have to wait until another week.

Tony Kempster is former chief executive of DBS Network

Recommended

Credit Suisse is confident TMT can be reignited

Federal Reserve chairman Alan Greenspan&#39s much anticipated interest rate cut in the US early this month did little to stimulate markets and the Bank of England&#39s subsequ ent decision not to reduce rates came as a blow. Investors would be right to feel less enthusiastic than last year. Annual unit trust returns averaged 25 per […]

B2C or B2B?

Last year was generally bad for dotcom businesses. It seemed that a month did not go by without reports of a dotcom business struggling to secure ongoing funding, calling in administrators or ceasing to trade. Typical dotcom business models rely on a business-to-consumer (B2C) proposition where the costs of middlemen – wholesalers, premises, people, etc […]

Britannic takes chance on ageing population

Britannic Asset Management is capitalising on the accelerating pace of the healthcare sector with the introduction of its global healthcare fund. This unit trust aims to achieve long term capital growth by investing in companies operating in a range of health fields, including pharmaceuticals, hospital management and biotechnology. Figures from the Institute for Fiscal Studies […]

LibDem leader accuses FSA over debacles

Liberal Democrat leader Charles Kennedy has acc used the FSA of failing to act appropriately over the Axa orphan assets case and the Equitable Life debacle. In a speech to the Financial Markets Associationon Tuesday, Kennedy slammed the FSA&#39s performance in both instances and called upon the Government to force the regulator to take more […]

India rate cut – more to come?

Kunal Desai, Head of Indian Equities at Neptune Investment Management India’s stockmarket rallied this week following news that the central bank was cutting interest rates more aggressively than expected. Commenting on the rate cuts and what this means for India’s economic growth, Kunal Desai notes that there were two important details in the announcement that have […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com