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Polar expedition reaches another milestone

The industry is waiting anxiously for the latest pronouncement on

polarisation. Due later this month, it could have major ramifications for

the fate of independent advice.

The findings of a study by consultants London Economics are expected to be

published at the end of the month. The FSA commissioned the study to inform

its decision on whether to change the existing polarisation regime.

The study is seen as so significant that IFA Promotion&#39s board has decided

to delay the appointment of a replacement for Ann-Marie Martyn until after

it is published. This will help it decide the qualifications the person

will need, whether lobbying or marketing skills.

The contents of the study are still under wraps but the industry is

bracing itself for change. It is commonly accepted that the Treasury would

like to do away with polarisation.

Polarisation was introduced in 1988 to give absolute clarity on the

difference between independent and tied advice. But industry sources say

the Treasury has long held the view that polarisation is anti-competitive

with, for example, high-street banks only being able to offer own-brand


The issue came to the fore again last year with the publication of the

Office of Fair Trading&#39s report into polarisation. The looming problem of

how to sell products in the low-charging stakeholder era has added to the


Polarisation could be tweaked to incorporate white labelling or completely

replaced with multi-ties. White labelling is the practice where one

provider takes the products of another to sell under its own brand.

Sofa spokesman Robert Reid believes white labelling is on the way. He says

its introduction will start a trend towards IFAs selling the concept of

advice rather than being product salespeople.

Reid would welcome such a shift. He says: “If you take products out of the

equation, then advice will not be biased. There will be a move towards

advice, anyway, irrespective of white labelling, with the advent of fund


“Anyone who thinks the market will stay the same is naïve. IFAs have

to stop swimming against the tide.”

LIA public affairs director John Ellis does not think any small tweaks to

the rules will have a great deal of influence on the marketplace. But he

fears the independent sector will be eroded if the current regime is

completely overhauled.

He explains: “People will be offered silly money for going into tied

relationships and competition between firms will see them giving out

premiums for loyalty as well.”

The effect will be compounded by the fact that a multi-tied agent will

look like an IFA to the outside world.

As for the timescale of any change, Reid does not believe it will take

long to get new rules in place if white labelling is brought in.

He says: “All you are doing is encouraging something that already goes on.

They just have to work out who to blame when things go wrong.”

Ellis says: “If London Economics comes up with something that pleases the

Treasury, then the matter will be settled straight away. But it is likely

the Treasury may want to study it more fundamentally. Then the FSA will

have to do its consultation with the wider world.”

He also points out that the Competition Commission may be brought in for a

third opinion. This could lengthen the whole process as the commission is,

in Ellis&#39s words, an unknown quantity.

It only gets up and running when the Financial Services and Markets Act is

implemented later this year. Ellis says: “I cannot see it being resolved

before next year.”

Whatever happens to polarisation and whenever it happens, it is sure to

fuel a lot of debate. Sofa says that, once the study is out, it wants to

sit down with Aifa and IFA Promotion to work out its next move.


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