Government polarisation proposals should not have negative impact on protection
The FSA's proposals for the de-regulation of polarisation have been met with a mixed response by the financial services industry.
Misys, which runs five IFA networks and has 7,200 registered individuals, said the proposals should not have a significant impact on the protection market.
Paul Charles, head of media relations for Misys, said: 'Some 66% of life and pensions business is distributed through IFAs, according to the Association of British Insurers (ABI). The IFA channel has always been healthy, and there is no reason why it will not be in the future. The protection industry is huge, and providers and IFAs have always had good relationships. A lot of the FSA paper was flagged beforehand and was not a surprise, and remember, it is only a consultation paper.'
The ABI has responded by saying that changes must widen consumer choice and confidence in financial advice. Alan Woods, ABI's head of life insurance and pensions, said: 'Any changes to the current regime must ensure that consumers have confidence in financial advice, and that insurers can continue to offer innovative products to meet consumers' changing long-term needs. The FSA has accepted much of the ABI's argument that wider reform is needed to boost savings and simplify regulation.'
However, the Association of Independent Financial Advisers (AIFA) remains unhappy with the proposals. Lord Hunt, chairman of AIFA said that the FSA's proposals to change polarisation would result in industry chaos and confusion for consumers. He said: 'It is extraordinary that the FSA is proposing to remove a cornerstone of consumer protection to solve the problem that tied agents can only offer a limited range of products. A simple system is being replaced by a free-for-all, and the FSA admits it does not know what the future shape of the market will be.'
The proposals come about as a result of a report from the Director General of Fair Trading in 1999, that concluded that polarisation rules restricted competition in the tied sector and prevented innovation, an FSA study agreed in 2000. The FSA's objectives require it to minimise adverse effects on competition from its regulatory activities.
The FSA's proposals:
• The existing polarisation regime for financial advice to be scrapped.
• Those firms operating independently will need to operate on a payment system to remove the potential for commission bias.
• The rules limiting investment in firms of advisers should be removed, meaning that firms of IFAs could be owned by providers.
• Disclosure obligations should be used to ensure clients understand the advice service firms offer.
• The full proposals are contained in CP121 and the industry has until 19 April 2002 to respond.
