Transparency is key motive in new system of financial advice |
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Tue, 31 May 2005 09:25
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A recent development, which has lead to diverse reviews, in the investment industry, has hit none other than the insurance advisors themselves.
It is integral for the consumers to understand that the products they opt for, provides value for money. To meet this objective and to facilitate the process of shopping for investment products and subsequently validate and assess its credibility, a new regime known as “depolarisation” has been introduced, which will administer the way financial advice is given and products are sold.
In the present scenario, either the tied advisor sells products on behalf of a single group or it is the independent financial advisor (IFA) who rules the market. But the new regime gives birth to a multi-tied advisor who can sell the products on behalf of different companies without the need to cover the entire market.
To be effective from June, people seeking financial advice will also be given two “keyfacts” documents which will lucidly explain the service that is provided along with the cost of the advice. Besides, it will also indicate if the payment will be made up-front or through commission on any other products obtained.
| Director of Retail Policy at the FSA, Dan Waters said “These keyfacts documents will make it clearer to consumers that even when financed through commission, advice comes at a cost – and it is consumers who ultimately pay through the charges levied on products they buy.”
Consumers in the existing situations could not take the right decisions due ambiguity backed by confusing options. Also at times, they were diverted to second-rate products, which offered poor value.
Critics are of the opinion that this three-way system will generate immense problems and resolve none. A spokesman for Which? , Teresa Fritz, said, "The whole thing is a complete mess. There are some good aspects to the new regime but it is mostly bad. Customers won't have a clue who they are dealing with."
"I'm not sure what the difference between a panel and a multi-tie is supposed to be, and I'm certain the customer won't have a clue who they are dealing with." was the impression given by an industry source.
“However, with any major rule change comes room for confusion, so we are urging people to make sure they understand the type of advice they are receiving, and to ask questions if they are at all unsure.” says the Chief Executive of IFA Promotion.
It might be that an adviser may operate as a multi-tied agent for annuities at the same time offer independent advice on investments. The agents of the Millfield Group offer dual licensing and the agents can be either multi-tied advisors or the IFA’s.
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