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Sofa: Public will suffer when advice is not available to all

Our duty is to ensure that the professional independent adviser remains a viable and valued profession going forward.

We should be strengthening polarisation and banning terms such as “independent mortgage advice” where the adviser is tied to one provider. Other terms used to confuse include “partnership” with the implication of independence.

As the London Economics report stated, the status of advisers is not always clear to consumers. Although current status is said to be a failure, proposals must deliver an improvement immediately. We cannot waste another four or five years for a new regime to bed in.

In the past, it could be argued that the consumer pays for any change to the cost of transacting business.

If the 1 per cent maximum charge applying to stakeholder spreads to other products, that would no longer be the case. This could have serious implications for the providers&#39 support for the IFA sector regarding the Investors&#39 Compensation Scheme. Ultimately, it will be the general public which will suffer when advice is no longer available to all.

Employers being made responsible for providing education on providing for retirement but receiv-ing tax relief on the fees charged is one way in which individuals could be encouraged to make provisions for retirement either by stakeholder or through Isas.

Another way would be to offer tax relief on the fees for advice charged by advisers.

But if neither of these options is adopted, then compulsion is the only alternative. However, if there is no expert support from IFAs, then the result of such compulsion could be worse than the current proposals.

The proposal for non-qualified individuals to guide individuals through stakeholder decision trees is the most likely to cause problems.

Consumer interest should be the prime factor in any decision. The argument that polarisation resultsin unfair competition should not prompt a need for change if it delivers the best market for consumers.

The key issue centres on who is the adviser working for and are they competent in the area in which they are advising? Transparency of advice costs is essential if we are to become a profession, as is the Advanced Financial Planning Certificate as the minimum benchmark.

If there is to be a debate, then all the parties involved in the decision process must take part and the consumer research should be the basis for the debate. Surprisingly, to date, there has been no substantial research to gauge public understanding of the current regime.

What will the short-term effect of gap-filling and white labelling be?

The immediate reaction of many of the bigger IFAs and networks would be to stratify their consultants/members into two distinct sections – those that need to remain independent and those who do not. The split is two-thirds multi-tie and one-third independent.

Looking to the future, one potential scenario might as follows.

The Advertising Standards Authority had never been so busy. Privately, the ASA often felt it was doing the job of the FSA, whose attempts at clear status for non-independent advisers have been an abject failure.

This was not for lack of effort, it was down to the colossal logistical problems it created. Monitoring teams were too few and, as the bulk of the institutions were seen to have deep pockets, big fines became the norm.

The remaining independents are fee-based, offering their clients true choice but their numbers are greatly depleted from a high of 22,000 in 2000 to just over 5,000 IFAs.

We would welcome a public debate on polarisation involving not just those who comment in public but also those working so resolutely in the background to dilute polarisation.

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