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Present system cannot cope

When we responded to the latest review of polarisation, we did so in line

with the FSA&#39s stated objective instead of simply defending the status quo

because of changes afoot in the market, particularly the rapid move to


An open debate is necessary if the logistical problems which multi-ties

would bring – for example, what happens to the client when one or more

multi-ties finish? – are to be exposed to the widest poss ible audience.

Currently, many providers rebadge other companies&#39 products or use

third-party administrators.

This process, known as white labelling, allows providers to have a full

range of products where they have gaps at present, such as PHI. As white

labelling is currently available, there is no need to introduce multi-ties.

To allow multi-ties where someone could market five or six companies&#39

products and display all those brands would lead the consumer to assume

that someone was independent when they were not.

We therefore proposed that white labelling gives that access to a full

range of products and multi-ties are unnecessary.

But there is a lack of open debate, which is unfortunate and does nothing

to bring us close to the common goal of clarity for the consumer.

The other key points in our response concerned commission rebates and titles.

The former is where the Office of Fair Trading pointed to the potential

for bias where commission was negotiated at the same time as evaluat ing

the competitiveness or otherwise of individual provid ers&#39 contracts.

If commission were added to plans after the evaluation, no bias would

exist and, as professional financial advi sers continue to evolve the

transparency of advice costs, would aid the development of the profession.

These “clean contracts”, which we fully support, would not prevent any

adviser from taking the same level of commission as at pres ent from the

plan but there would be no cross-subsidy from elsewhere.

Cross-subsidy is where the full effect of the rebated commission is

reduced by higher commission paid on that product to other advisers.

The latter point was on titles. While people are able to display nearly 30

letters after their name on passing the “driving test” for advising on

financial services, we will not be able to establish a profession with

total credibility.

We need titles that mean something. Titles should differentiate between

independents and others in a manner which is understood by the public and

not just us.

We need to take our lead from a much run advert which says: “It does

exactly what is says on the tin.” This level of clarity in titles is not

just preferable, it is essential.

Sofa is firmly behind the objective of this review, namely, “to deliver

the best deal to consumers in terms of choice, value for money and dynamic

competition benefits”. Multi-ties does not move us to this objective but

then neither does the status quo.

We need a stricter regime of polarisation with the changes we have

suggested. If the objective is to be met, the present system is not up to

the task.


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