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Poleaxed as FSA opts for massive changes

Over 13 years of polarisation is to be swept away following radical proposals from the FSA to overhaul distribution and advice completely.

Multi-ties, or “distributor firms” will be introduced, directly authorised by the FSA they will be responsible for advice given rather than a lead provider which had been widely touted.

The better than best rules will be lifted, as will rules limiting investment in IFA firms, which the FSA claims “will help maintain a robust independent sector for advice”.

A new status disclosure document will tell consumers which of four kinds of adviser they are seeing and how qualified they are, what remuneration structure is in place and whether they are tied to any companies. This would be in addition to a “buyer&#39s guide” to financial advisers.

Advisers who want to call themselves “independent” will have to adhere to a new defined payment system “to remove the potential for commission bias”.

All products would be unbundled to make the cost of advice transparent to consumers.

The FSA is pushing for the full abolition of polarisation but the consultation also includes the options of just allowing gap filling or multi-ties.

Responses to consultation paper 121 – accompanied by three volumes of research – need to be in by April 19. The regulator intends to reach final decisions by the summer and to implement changes by the end of the year. The review follows findings by the director general of fair trading in 1999 that polarisation was anti-competitive. Phase one of the review had depolarised stakeholder and direct-offer promotions.

FSA chairman Howard Davies says: “This is a significant liberalisation package to enhance consumer choice by breaking the shackles that polarisation puts on competition and innovation. The regime we inherited represents a major market distortion. We propose that it should be abolished.”

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