PIA proposals could end impartial advice oveyr 2
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Your support makes all the difference.Independent financial advisers could be given the right to restrict the products they sell to just a handful of insurance companies, if a financial services watchdog bows to pressure and changes its rules. Such a move would in effect mark the end of truly independent financial advice.
Proposals to scrap the existing system, called polarisation, are discussed in a document currently being drawn up by the Personal Investment Authority, the industry watchdog.
The move to change the system is being backed by Sir Mark Weinberg, the chairman of J Rothschild Assurance. Sir Mark received a knighthood for his efforts in helping to draw up the Financial Services Act in 1986.
Under the existing system, financial advisers must choose between selling the products of only one company or advising clients about the entire range within the market. Changing the rules would allow them a half-way house, in which they tie to several companies rather than one.
This would allow existing tied agents to sell a wider range of products than before, but independent advisers would be restricted to just the companies they tie with.
In return for abandoning the polarisation system, it is being suggested that insurance companies might shoulder their new tied agents' share of the overall pounds 3bn pension transfer compensation bill.
This would benefit independent advisers, hundreds of whom could be forced out of business by the need to offer redress to clients whom they wrongly advised to opt out of company pensions and into private ones.
The proposals for a "multi-tie" system have been bitterly attacked by some financial advisers as harmful to the consumer.
Brian Denny, the chairman of the IFA Association, the advisers' trade body, has argued that prospective clients would be unable to tell whether advice being given was truly independent.
Academic studies have suggested that the existence of a strong IFA market has helped to keep prices of various products down as providers are forced to compete for business from advisers.
However, even independent advisers admit that the idea of impartial advice is something of a myth.
Jim Gaskin, the managing director of Countrywide, a national organisation of 600 independent financial advisers, says: "In reality, although we have over 200 companies on our recommended product list, more than 90 per cent of our business is done with 25 companies."
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