Does the FSA really think that so called new "Distributor" Advisers will fair any better?"
Yesterday, the Financial Services Authority (FSA) unveiled their proposals for the review of financial advice in the UK. Currently, a consumer can obtain advice from Independent Financial Advisers, IFA's, (who work on a client's behalf) and Insurance company (tied adviser) representatives (who work on behalf of the insurance or investment companies they represent). If new proposals succeed, more types of adviser will enter the market such as "Distributor" Advisers, who can market the products of selected companies but still remain Insurance Company Advisers and act on behalf of a company and not the client. This is supposedly for the benefit of the public and to increase accessibility of advice.
As part of a larger survey on this site, we asked you, the users, who you trusted to provide you with financial advice. Of the 378 people who have so far answered this question 60% trusted Independent Financial Advisers, 24% trusted Bank and Building Society Advisers, 10% preferred Accountants and 6% trusted Solicitors. Not one person has responded by saying they trusted Insurance Company Advisers!
Ashley Clark, Director at commented by saying: "The results so far are not a surprise, the public at large are becoming more aware of financial issues. Year in year out, we see the role of Independent Advisers and the amount of people who prefer to seek advice from them increasing. The FSA appear to be ignoring this fact and are on their own agenda, fuelled by larger Institutions trying to destroy the Independent advice sector. We have seen it in retail areas such as electrical goods and supermarkets, why not attempt to kill the most successful and professional sector of the Financial Advice market?"
In yesterday's release, Howard Davies, Chairman of the FSA, said that "new and enhanced disclosures should be introduced to ensure that consumers are clear about the different types of adviser available to them". responded to a previous FSA consultation paper on the status of advisers within the polarisation debate by likening the confusion that would ensue to that of events similar to those at the Tower of Babel. Ashley said: "We labelled it "Babelisation" and not Polarisation, numerous advisers talking different languages and the public ultimately being confused and therefore taking no action to increase savings or protecting themselves. Nothing has changed our minds to alter this view.
There should be one type of Financial Adviser only, that is an Independent Adviser, not the menagerie that is proposed. The public have told us who they trust, the industry should listen to them and not some limited consumer panel or Economics School". He added: "If everybody was Independent there would be no need to make consumers more aware of an adviser's status".
The FSA also propose that limits on the amount of investment that firms, i.e. insurance and investment companies, can invest in an advisory practice be abolished. In doing this they say that "better than best" rules will be abolished. This is the requirement that if an adviser works for a firm that an insurance company has a financial interest in, then they will no longer be required to only recommend the products of that linked company if it is shown to be more than just better than one of an alternative, non-linked company. Ashley says: "This is ridiculous! We are striving to make the Financial sector more professional and trusted. This move can only assist in casting doubt over the question of unbiased financial advice".
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