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Top consultant warns of multi-tied cartel

The introduction of multi-ties would create a cartel of providers, leading to a disastrous reduction in competition and higher prices, according to leading consultant Bacon& Woodrow.

B&W, which has advised the FSA on league tables, FSAVCs and warns if the FSA and the Treasury permit multi-ties, they will allow a handful of providers to corner the market.

Aifa has backed up B&W&#39s warnings. Director general Paul Smee believes the London Economics&#39 report on polarisation dramatically underestimated the importance of the IFA sector in allowing new entrants to get established.

B&W associate Icki Iqbal says it is important for there to be a proper independent sector and to change this would be a detriment to consumers.

Iqbal has backed Money Marketing&#39s Poles Apart campaign&#39s demand for a public debate so all parties affected by the decision would have the opportunity to make their opinions heard. He says the regulator must start to listen to those it is regulating.

The warning comes as it emerges the FSA has sent a top-level team to meet product providers face to face. Providers fear the regulator is unhappy with their initial responses to the polarisation consultation which mostly backed the status quo or suggested only limited changes.

The FSA team, which includes head of investment business David Severn, FSA consultant and former ABI head of life insurance Richard Hobbs and investment business associate Patricia Worthington, has been in Scotland this week meeting life offices.

Iqbal says: “Every time regulators have taken a decision in the interests of consumers, the effect has been the opposite. Multi-ties will be anti-competitive, it will create a cartel. If you end up with only five to six players, prices will go up and customers will suffer.”

Smee says: “The existence of the IFA sector makes it easier for new players to enter the market. We raised this point to London Economics who dramatically underplayed the possibility in their report.”


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