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Two-tier system could bring in new blood

There is a limit to how much anyone can write – or read – on polarisation and I reckon many of you must be approaching your limit by now. So, for a change, I will look at chapter five of the consultation paper. Not polarisation per se but near enough for all but the most committed devotee.

Chapter five, Complemen-tary Initiatives in the Retail Marketplace, is different from the rest of the paper, less didactic in tone and more questioning in approach. It asks big questions without appearing to have the answers already lined up. And the questions are well worth answering.

There does seem to be a realisation that the levels of regulatory control over the advice process have become too cumbersome and bureaucratic and the question is asked as to how these can be simplified. The paper itself has a couple of proposals for cutting out unnecessary duplication of paperwork and we should be ready to offer up some more.

What bits of regulatory requirements are superfluous, costly and irritating to clients? Which do not add value to the advice process and (this is an important “and”) could be dispensed with without opening up the adviser to the risk of disgruntled clients winning complaints with the ombudsman or in the courts.

We must live in the real – consumerist and litigious – world.

This debate is going to evolve to a slightly slower timescale than the central debate on polarisation but it seems to offer the first real chance to break away from the layers of regulation of the advice process which have accreted over the years. We should be giving it our best shot and, if we do not, we will have lost the right to complain about the burden of regulatory requirements for a year or two at least.

Chapter five also brings in the issue of two-tier advice – should advisers trained to a lower level of competence be allowed to advise in strictly defined areas on strictly defined products?

There is a temptation to dismiss this as an irrelevance to the professional IFA and to see it as a way of helping the big battalions. This could be the wrong tack. I constantly hear from IFAs about the costs of bringing new blood into IFA practices. If that new blood could start basic advisory work while under training, could that not make it a more economic proposition?

If I were a consumer, I would far rather receive advice from someone in the controlled environment of an IFA practice than in a sprawling tied salesforce. I would feel happier that the less qualified adviser in the IFA practice could get me the advice I needed if my financial affairs went outside his competence.

Of course, there are complications and risks. The adviser must know the limits of his or her knowledge. The big salesforces cannot be given carte blanche to set up operations exclusively devoted to the giving of “limited advice” or there will be no one to whom to refer the consumer if things get complicated. But this is no reason to reject the idea outright.

And, yes, we are still pursuing the core polarisation debate on all fronts. We are contacting the professional institutes to see if they will allow their members to refer clients to advisers who are not called independent (in case many choose to become authorised advisers instead); and we are putting forward our analysis of how the proposals will affect small businesses to the FSA&#39s small business practitioner panel and consumers to the FSA&#39s consumer panel.

No let-up in sight and so no let-up in the articles which you will have to read on the subject.

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