The FSA's proposals on polarisation create a more 'buyer beware' regime with the onus on the consume...
The FSA's proposals on polarisation create a more 'buyer beware' regime with the onus on the consumer. But in the so-far hazy environment laid out, it is difficult to see if it will be successful.
The regulator says in looking at other regimes around the world, it discovered many just accept as a fact of life that advisers will have a bias. Instead of regulating to control it, they require transparency in all dealings so the onus is on the consumer.
Yet the effort to make things clearer to the consumer so the responsibility lies with them does not look that successful. First of all, it will only be possible to be called independent if an adviser uses fees or a defined payment system, which could actually be based on commissions as long as the consumer is clear about it.
The second, and perhaps more misty part of the proposals, is that the FSA believes it acceptable that an adviser can be independent and 100% owned by a product provider, and therefore not held to the 'better than best' rules which currently prevent ownership bias creeping into the advice process.
It has yet to explain in detail how an IFA might explain that while it is 100% owned by provider X, when it recommends provider X's products, it is doing so independently. How convinced are consumers likely to be? Even the Oxford dictionary defines independence as 'free from control in action, judgement; not dependent on anything else for function; not reliant on the support, especially financial support, of others.'
It appears the FSA may have to buy a dictionary.
But the confusion of working out what independent means is only one problem ' there are, after all, four suggested categories of adviser: tied, multi-tied, IFA and independent financial consultant (which the document does not really define but expectations are that this may be the proposed low-tier adviser).
Consumer confusion aside, many intermediaries are actually less concerned about these changes than expected. And why should they be? Other than the dropping of 'independent' from their title, life is likely to continue the same way it has in the past, only with fewer regulations and the option to go to product providers to help fund their businesses.
The shape of the industry will change but the intermediary's role in it has just got more interesting.
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