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The war of independence

As the dust from the FSA&#39s recommendation that polarisation be scrapped settles, so the recriminations start. The leadership of field marshals – or even director generals – comes under close scrutiny as the IFAs&#39 D-day approaches.

Given the pressure of the tight timetables under which the FSA is trying to rush fundamental market changes in, it is only natural that battle tactics are being questioned, even if outright rebellion and mutiny remain unlikely.

At the recent Money Marketing IFA UK conference held in Exeter, panellist Falcon Group development director Jeff Williams was taken aback by the vehemence from the floor, with many believing that Aifa was being defeatist and should be standing its ground more on IFAs&#39 behalf.

This was in response to Williams stressing that IFAs should not forget they are in the middle of a consultation period and should not accept depolarisation as a done deal.

Philip J Milton & Co managing director Philip Milton attended the conference and voices some disappointment at what he perceives to be Aifa&#39s stance.

He thinks there is a danger in sending out mixed signals. “It is like Tony Blair and the euro, saying we are not going in and yet spending millions in preparation for doing so. There is an inevitability in the air but nobody except the banks and insurance companies thinks getting rid of polarisation is a good thing. You should not show your hand in the way Aifa has done.”

Nevertheless, Milton cannot see himself at this stage submitting a personal response to CP121 because he does not believe he would be saying anything different to the trade bodies. As his business is largely built around discretionary fund management, he says he cannot multi-tie. “We will have to struggle on as independents under any new regime,” he says.

In addition to frustrations about perceived defeatism, there are also criticisms being directed at the whole approach taken to lobbying for the IFA sector since the OFT raised concerns about polarisation in 1999.

Syndaxi principal Robert Reid says: “The tactics deployed to date have been fairly naive. People chose to defend independence as the most appropriate tactic, when in fact we all knew that it was not necessarily the case that IFAs scoured the entire market. This left them open to a fairly easy sniper&#39s bullet from the FSA. Running after the status quo was clearly futile.”

Reid thinks instead of upholding the idea of independence, IFAs would have been better served by lobbying that focused on the detailed logistics of multi-ties and alternatives to the present market.

But there are still many who endorse the position taken by Aifa. For instance, Wentworth Rose managing director Philip Rose says: “The battle is lost and the chance of any significant U-turn is zero. I do not think it is fair to blame the trade bodies – Paul Smee and Aifa have done a good job. It was too much of a task for them.

“I think we all underestimated the effect of Europe. With multi-ties allowed in Europe, it was almost a done deal. We also underestimated the ambivalence of the insurance companies, many of which relished the chance to control retail.”

For Rose, all that remains to be done is to work hard to ensure the rules are workable and fair.

Some people in the ind-ustry see no need to fight or to panic. Hargreaves Lansdown chief executive Peter Hargreaves predicts that every IFA will do as he will do and multi-tie. He claims it will not change his business at all.

He is dismissive of the grounds that so many IFAs are seeking to defend. He says: “We have not used the word independent and it does not feature on our letterhead. We have never used the silly blue logo and have no interest in the trade bodies. You could have spent only 10 minutes to think up a better system than the present one. We cannot see what all the fuss is about and cannot be bothered to submit a response to the consultation.”

One of the problems, as Reid points out, is that the trade bodies have been trying to represent a very disparate group.

Given the range of interests and reactions, a single voice becomes hard, if not impossible, to achieve.

Aifa director general Paul Smee rejects criticisms directed at his approach. He says: “Some would like us just to shout a lot but the reality is that a lot of IFAs and product providers are talking to one another and research shows that most have accepted that polarisation will go. I have been talking to a lot of IFAs who agree with my tactics. At the moment, we are representing IFAs – any change in this is an issue for the future.”

Smee suggests that the thrust of the changes is dominated by a wish in high places to increase choice for a sector of the population who previously went to the tied adviser, and says there is little that the IFA sector could have done to influence this.

He says: “I dispute that any other tactics would have resulted in a different outcome. CP121 is a lopsided and inadequate document that focuses on the wrong part of the market.”

Smee strongly believes there is only one battle tactic open to IFAs that stands any chance of success. He says: “The only way to go is to attack CP121&#39s flimsy foundations. We need to attack the detail. The defined-payment system is a mess and we must point out the unfairness of differential regulation.

“By attacking this detail we are undermining the whole FSA case and we can get quite a lot of change. This way we can get to a point where gap filling becomes the only coherent position,” he says.


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