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Revolutionary road is rocky

This year will bring a revolution in financial services. It will consist of changes to polarisation, a clampdown on past performance and with-profits, Ron Sandler and all his works, a commission shake-down, mergers, takeovers, consolidation and maybe even more closures in lending, fund management and insurance.

Fans of evolution and measured reform, such as this newspaper, will be very disappointed. The providers will divide into three camps – proactive, reactive and wait and see.

In the first category, we would place Skandia with its audacious move for Bankhall and its neat sidestepping of the better than best rule. Royal & Sun Alliance is arguably in the second group after its closure to new with-profits business. The third includes those who believe they can let everyone else make the mistakes for them and then take advantage and those who cannot afford to do anything else.

There will be a great deal of copycat activity from insurers but do not underest-imate how restive the fund management industry is becoming about distribution too.

But the real drivers of change will be the Treasury, inveterate fiddlers or reformers depending on your view, and the FSA which has a cupboard full of new brooms and a fetish for spring cleaning.

We expect substantial reform to polar-isation at exactly the wrong time. The curr-ent system would have provided a stable basis for other reforms, but chairman Howard Davies sounds hellbent on this prejudice-driven change.

Every IFA should have at least a plan A, B and C. This will be business red in tooth and claw. Heaven help the investing public.

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