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Where IFAs dare

It&#39s a bit daunting being “a lone voice”, as Aifa was described in Money

Marketing a couple of weeks ago. I ordered a tin hat and started referring

to my office as the bunker.

Now it appears we may not be quite as alone as was thought. There is a

consensus among industry bodies that polarisation in some form needs to

stay. It is more a matter of nuance and emphasis than deep-rooted


I make no apologies for taking a robust stance. It is for those who

advocate change to come up with a cogent and well-argued justification.

I do not believe that the Office of Fair Trading report constitutes that

case. I also believe that the argument must be focused on the needs and

concerns of investors, not the convenience of particular types of operator

within the market.

There has been too little said about the costs of change. All change has a

cost. In the case of changes to polarisation rules, whether radical or

fiddling, the costs will fall not just on advisers but also on providers

and regulators.

I have not seen any estimate or even guesstimate of what those costs will

be. Some will be direct, such as the costs of restructuring distribution

channels. Some will be indirect, for example, revised regulatory

arrangements to cope with the problems of a market where there is less

clarity about the status of advisers.

These costs must be spelled out, analysed and agreed before a proper

discussion and cost-benefit analysis can be undertaken. Change should

follow such an analysis, not precede it. Let it also be remembered that the

costs of change will ultimately be borne by the investor.

Then there is white labelling. Now there&#39s a paradox. In one part of the

regulatory forest, people are slogging away to produce comparative

financial information. They are drawing up tables and analysing what

information is needed to allow empowered consumers to make informed choices

(not my clich&#233).

I am a believer in financial information. It will lead to better-informed

conversations between advisers and clients and it will reduce the risk of

clients finding they have something that does not live up to expectations.

I do not believe that extra information for the consumer will

disintermediate (ghastly word) the adviser. All the evidence suggests that

a professional who guides an individual through a mass of information

becomes ever more necessary.

But when it comes to the identity of the product being purchased, it

becomes perfectly acceptable to conceal the identity of the provider

underneath a white label. Shurely shome mishtake.

There are fundamental changes sweeping through the marketplace. If there

is wholesale restructuring of polarisation, will the consequent drive for

share of distribution – and the dislocation to client relationships which

will undoubtedly ensue – bring the market into the brave new world quicker

or will it be a brake on the sensible evolution of businesses to cope with

new challenges.

For the moment, I pose the question. But it needs to be answered before

fundamental decisions are taken and I know where my intuition points.


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