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Proposed changes to the polarisation regime simply underline the direct connection between the need for stakeholder to succeed and the wish to change a system which is imperfect but capable of fine-tuning.

The London Economics report referred to the confusion that clients have with the status of intermediaries and, in particular, the banks. I would suggest that allowing the banks to offer a selection of providers&#39 products will only lead to more confusion in the mind of the customer. This, of course, assumes that banks will wish to dilute their brand by offering other products in their range of options.

Stakeholder remains the wrong solution to the problem that those in low incomes cannot invest sufficient amounts to create the fund they need in retirment. This is not a social evaluation, it is simple mathematics. To suggest that these individuals give up smoking and/or drinking to enable a higher level of savings simply demonstrates that the architects of the scheme do not understand their market. This was recently proved beyond doubt when, on the application forms for the minimum income guarantee, pensioners were asked if they were pregnant.

The concept that Catmarks will avoid misselling is flawed from outset. An individual who takes out a stakeholder plan when protection of his dependants in the event of his death or incapacity is more pressing has been the victim of misselling, Catmarks or no Catmarks.

It is clear, therefore, that all packaged products will need to be Catmarked if multi-tied advice is to proceed without inferior products being promoted. After all, if a multi-tied agent is selecting providers on the basis of their products, will pole position be given to the products which are best for the consumer or the commercial objectives of the multi-tied agent? Answers on a postcard, please.

What this change has brought into focus is what the IFA will look like in the future. It is hard to see the fee-based IFA (fee-based being the key differentiating factor from the multi-tied agent) choosing to use packaged products. The rise in the use of self-invested personal pensions will continue.

The concept of all product providers being distributors and providers does not hold water, especially when you consider that, to make money as a stakeholder provider, it is generally accepted you need 25 per cent of the market. Given that few providers get close to 5 per cent of the personal pension market, it is unlikely that they can all continue to manufacture their own product. On that basis, what value, if any, will these distributors bring to the IFA in the future?

For the providers which have taken an aggressive stance in pricing their contracts – while providing commission levels which assume persistency as we have never seen it before – the introduction of multi-ties for stakeholder must or should be of great concern. How many of the group personal pension schemes set up pre-stakeholder will survive if the IFA moves across to be multi-tied with a range of providers which do not include the current host for the GPP?

Could this be the real reason why so many providers wish to deal direct? It cannot be so that the employer can witness their admin skills (sic) first hand. The real reasonis surely that they are reacting to the threat of schemes moving on before the provider has covered its costs.

Robert Reid is a director of Syndaxi Financial Planning


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