View more on these topics

Polar stations

When it comes to sales of and advice on retail investment products, the ABI believes the interests of consumers, regulators, advisers and providers are pretty close to one another. These groups would probably all agree that the following three overall aims are crucial – to ensure consumer protection through transparency and product quality; to promote competition, allowing innovation and efficient markets; and to promote more effective saving to help people maximise their financial resources.

Any rules or proposals for changes to them, therefore, need to measure up against these three aims. The ABI believes the current system has done a good job as far as the independent sector is concerned, particularly by developing consumers&#39 understanding of independent advice and where to get it.

However, we believe there could be scope for improvements in competition in the tied sector. Melanie Johnson, in her letter in the September 21 issue of Money Marketing, highlights that now is a good time to look at the rules again, pointing out new products and new delivery channels have developed and customer expectations changed. The question is how to bring about improvements without compromising the benefits of the existing system.

The report commissioned by the FSA from London Economics suggested introducing multi-ties would offer the greatest benefits in terms of economic theory. However, there are significant margins of error around the critical assumptions that led to this conclusion, in particular, the likely levels of consumer confusion and the number of firms that would become multi-ties.

The research in the FSA&#39s report shows that, although awareness of independent advice is improving, 20 per cent of consumers still do not understand what type of adviser they are seeing. This figure would undoubtedly increase if multi-ties were introduced. The FSA&#39s own consumer panel has recently expressed concerns that introducing multi-ties could cause the IFA sector to shrink significantly. These effects would not be in line with the Government&#39s objectives.

Nor does the time look right for such radical change. The impact on the market of stakeholder pensions is still uncertain and so are the effects of what look likely to be far-reaching technological developments. As the FSA consumer panel further points out, changing the fundamentals of polarisation could throw the retail investmentindustry into turmoil.

The ABI supports an approach to the tied sector that builds on the strengths of the current system. We have supported further work on option four of the London Economics report, namely retaining the essentials of polarisation. It would allow the clear distinction between IFAs and tied advisers to remain and would retain clarity for customers about advice and status. It would allow tied agents to introduce products from other providers to fill gaps in their own ranges, increasing competition within the tied sector and promoting consumer choice and product quality.

It will not be straightforward to design a gap-filling regime that will satisfy everyone. The concept of a “gap” will need to be cast carefully to ensure that competition is indeed improved without inducing a “slide” towards multi-ties.

As many commentators, including Melanie Johnson, have pointed out, the IFA sector is highly valued by consumers and has played an important role in promoting savings and investment.

It will be important to ensure, in the context of any gap-filling regime, customers are clear about the status of independent advisers compared with tied ones. There are other issues to consider such as responsibility for product performance and literature, rules on commission and how training would be organised.

These issues deserve further work. If the right sort ofa gap-filling regime can be developed, it could match up well against the three aims of consumer protection, efficient competition and more effective saving.


Halifax turning tied

The revelation that Halifax is to scrap its IFA salesforce of 130 is a slap in the face for those who have championed the IFA cause and consumers&#39 right to choice.It also goes against moves by other major financial institutions which are building up their IFA arms in a bid to provide more choice for […]

Ethical investment booms in UK

Ethical investment is one of the fastest growing sectors in the UK, according to figures from the Co-operative Insurance Society.In the past five years since CIS launched its ethical investors&#39 guide, the number of ethical funds has increased from 14 to 50. Funds under management have more than quadrupled in the same per- iod from […]

NPI taking stakeholder on the road

NPI is embarking on a series of national roadshows designed to strengthen its presence as a stakeholder provider.The roadshows will be led by NPI managing director Trevor Thompson and parent company AMP Group group executive Damon Watkins.They will be held at 14 venues over the next few weeks. Around 1,000 IFAs are expected to attend.The […]

TMO fix mortgage for self certers

The Mortgage Operation has brought in the self cert fix mortgage.The self cert fix is aimed at self employed people who have difficulty proving their income when applying for a mortgage.It has a fixed rate of 6.95 per cent for the first three years of the mortgage, after which it will revert to two per […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    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