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Planning for D-Day

With the FSA unveiling the rules for the depolarised market on Decem-ber 1, we ask leading industry figures how this will affect advisers.

Outgoing Aifa director general Paul Smee – who steps down from the post on December 3 – believes depolarisation was inevitable.

He says: “Was it ever going to be sustainable for the market to be shaped totally by the regulator in the way polarisation shaped it?”Although he agrees there were huge benefits in polarisation which created a market where advice was sold as well as products, he does not believe it is possible for an artificial regulatory framework to be imposed on the market indefinitely, and so depolarisation was always going to happen.

Smee does query if this is the right time for depolarisation. He says: “We felt depolarisation at this particular time was wrong, and it would have been better if more time had been given to us to get used to the concept.”

Institute of Financial Planners chief executive Nick Cann says depolarisation will benefit the market as it will force businesses to focus on what they do best and how they go about doing this.

He says: “The industry will have to look at how its offerings are sustainable in a market that is not reliant on products. Advisers will have to look at the fees issue, and if they can offer anything to a client who does not need a product.”

Cann believes depolarisation will take two years to have an impact on the market, and predicts that at this point product providers will start reducing commission and service levels for small IFAs. He can foresee 60 to 70 per cent of the market being multi-tied in two years time.

LIA head of public affairs John Ellis has seen his perspective on depolarisation shift over the last month and now believes the change will have more impact on the market than he originally predicted.

He says: “Bread and butter business for IFAs is going to fall away, with banks and multi-tied operations picking up bits of business that would previously have gone to IFAs.”

He believes that consumers who are familiar with their bank will realise it is offering a wider choice of products and settle for this rather than going for full blown advice.

Ellis says: “Depolarisation is the future for IFAs, but I am not sure it is the one we would have chosen.”

IFA Promotion chief executive David Elms (left) believes the onset of depolarisation will not cut back the demand for independent financial advice, because from a consumer perspective IFAs will still be in demand as long as the public know where to find them.

Elms says: “Once the consumer understands the difference between independent and multi-tied advice, it would be unusual for them to choose any other route than the independent one.”

He says that the most important thing that IFAs have going for them is their independence and he urges them to display this prominently so that consumers looking for advice know that what they are receiving is independent advice.

Elms does not foresee any major changes in the way IFAP is funded post depolarisation but points out that it has recently been receiving a new source of income from IFAs subscribing to its new online marketing package.

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