With the introduction of the first stage of polarisation changes likely to coincide with the arrival of stakeholder in April, the industry is looking to the greater battle ahead.
IFAs are conceding that the FSA will get its way over the changes which will allow pro viders to offer other firms' stakeholder pensions and Cat marked Isas but are looking ahead of these changes for clues to how the more indepth consultation over polarisation will develop.
Although most in the industry feel that the immediate effect of the new changes on the day-to-day work of IFAs will be minimal, the chief concern is that the new rules are intended to prepare the ground for a more profound review which will threaten polarisation.
Many IFAs fear that polarisation changes are being brought in because the Gov ernment is desperate to ens ure the success of stake holder, regardless of the long-term ramifications for consumers and the industry. But most industry commentators believe that any benefit from stakeholder sales will be slight.
The principal fear among IFAs, however, is that the public understanding of what an IFA is will be diminished.
Scottish Equitable IFA training manager and vice-president of the Chartered Insurance Institute Peter Williams says: “The industry has lost the argument for phase one. The question for phase two is whether changes are good for the consumer.”
The consultation on phase one, for which contributions are required by February 16, will set the agenda for the second phase. Williams says: “The Lon don Economics' report said consumers preferred IFAs to tied agents but that when they evaluated what policy people had actually bought it was often from a tied agent. This must be because the consumer was misled.”
Aifa director general Paul Smee says: “We must ensure the franchise of the IFA rem ains pure. Stage one of the reforms muddies the waters but I do not see it as a crisis point.
“The fear of stage two is that it will look at the theoretical benefits of change without considering the reality of the marketplace. It may look good on paper to say tied agents offer more choice but is this true? We need to look at what multi-tie actually means. I think that many IFAs will want to stay independent bec ause they think it is in their customers' interests.”
The FSA says that how to make it clear the extent to which a salesman is tied is something that needs to be considered in the round-one consultation.
There is a feeling across the industry that introducing changes to polarisation on the back of stakeholder will make it impossible to identify the benefits of either and the risk of damage will be high.
The pension industry is quite bullish about the product itself but sees no need to change its regulatory regime.
Scottish Life marketing director Alasdair Buchanan believes the long-term outlook for the sale of pensions is positive for the companies big enough to survive.
Buchanan says: “The Government has set out its stall with regard to the move away from state pensions. Demographics and economics point to gro wth in pension sales.
“Stakeholder and electronic trading have already boosted competition hugely, and there is no need to change polarisation. Radical changes will damage consumer trust in the long run.”
LIA public affairs spokesman John Ellis is predicting the end of the IFA if multi-ties are introduced. He says: “We would say to the FSA that the first stage represents a trial term and any lessons should be taken on board before stage two
starts. The introduction of multi-ties would massacre IFAs. It is like the corner shop versus the supermarket, with personal service being sacrificed to financial muscle.”
But he adds: “For years, IFAs have put panels of prod ucts together on the basis of the best deal for clients. The new rules say banks and insurance companies can do it as well, but no criteria for it has yet been set.”
The alternative products that providers will offer when the first changes come into effect will mainly be gap-fillers, covering products that the provider does not pres ently offer. There will also be some attraction for less well known names to associate themselves with more established names.
But the concern remains that there will be an incentive for direct providers to bring in extra products from comp anies that offer them the most attractive terms for taking their products rather than choosing the best product for the consumer as a tie-in.
The FSA admits there is nothing to stop firms choosing a tie-in product on commercial grounds ahead of consumer value.
FSA spokeswoman Louise Buckley says: “Consumers will get good value products from tied agents but they will not necessarily get 'the best', and if they want to look across the market they will need to go to an IFA who may charge them.
“I am not denying that it is a possibility that some firms will do that but it is unlikely. If you have an uncompetitive product then it will not survive. Also, the narrow margins do not allow enough scope for that to happen.”