Association is concerned over FSA's plan for shake-up.Byline: Meurig Phillips
INDUSTRY watchdog, the Financial Services Authority The Financial Services Authority ("FSA") is an independent non-departmental public body and quasi-judicial body that regulates the financial services industry in the United Kingdom. Its main office is based in Canary Wharf, London, with another office in Edinburgh. (FSA FSA Financial Services Authority
FSA Food Standards Agency (UK)
FSA Farm Service Agency (USDA)
FSA Financial Services Agency (Japan) ), has released its ideas aimed at improving the choice available to consumers.
Central to their plans is the question of polarisation or status of financial advisers.
Currently, financial advisers are either tied, meaning they can only sell the products of the company they represent - typically high street banks or large insurance companies - or be independent, whereby they advise on the products of a wide range of providers in the marketplace.
The current situation has arisen as a way of safeguarding consumers and simplifying the process of receiving financial advice. The FSA has now proposed abolishing polarisation in favour of the introduction of another level of advice, namely 'multi-ties' or 'distributor firms'.
This will allow tied advisers to offer products from a limited range of companies in addition to their own.
Furthermore, firms wishing to remain wholly independent will have to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?"
coordinate - be co-ordinated; "These activities coordinate well" a 'defined payment system', which requires an upfront agreement between the customer and the Independent Financial Adviser (IFA Immunofluorescent assay (IFA)
A blood test sometimes used to confirm ELISA results instead of using the Western blotting. In an IFA test, HIV antigen is mixed with a fluorescent compound and then with a sample of the patient's blood. ) defining in advance the amount to be charged.
This would prevent IFAs from being directly remunerated re·mu·ner·ate
tr.v. re·mu·ner·at·ed, re·mu·ner·at·ing, re·mu·ner·ates
1. To pay (a person) a suitable equivalent in return for goods provided, services rendered, or losses incurred; recompense.
2. by means of commission from product providers.
Interestingly, research commissioned by the FSA indicates that consumers presently have a preference for independent advice. Arguably ar·gu·a·ble
1. Open to argument: an arguable question, still unresolved.
2. That can be argued plausibly; defensible in argument: three arguable points of law. , this could be restricted by the reduced number of IFAs that would result as a direct consequence of the FSAs proposals.
The research points out that 80 per cent of people receiving financial advice are covered by the tied sector; the other 20 per cent being serviced by IFAs. Under the FSA guidelines, advisers in the tied sector including multities, will be remunerated by way of commission!
The proposals have met with a heated response, not least from the Consumers' Association The Consumers' Association, which trades as Which?, is a charity, registered in England and Wales No 296072. Which? Ltd is its wholly owned trading subsidiary. It is a consumer rights organisation in the UK, founded in 1957 by Michael Young. which believes the abolition of polarisation will increase consumer confusion.
Sheila McKechnie Dame Sheila Marshall McKechnie, DBE (May 3 1948 - January 2 2004) was a Scottish trade unionist, housing campaigner and consumer activist.
After graduating in Politics and History from Edinburgh University, where she was a friend of future UK Prime Minister Gordon Brown, she , director of the association, said:
"Instead of boosting independent advice, which our research has shown to be the best way of providing a high quality, professional service, these reforms are likely to squeeze IFAs out of the market."
Ms McKechnie added that the Consumers' Association was "extremely concerned" about the introduction of multi-ties which would "significantly boost the power of product providers and high street banks" (Financial Adviser, 17 January 2002).
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