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Last Updated: Saturday, 27 November, 2004, 14:28 GMT
New rules could end independent advice
By Paul Lewis
BBC Radio 4's Money Box

FSA headquarters
The FSA rules come into effect on Wednesday
A High Street bank has told the BBC that independent financial advice could disappear within "two to three years" as a result of changes in the way financial products are sold.

The changes begin on 1 December and will be phased in over six months.

They will separate advisers into three groups: independent; those selling the products of one company; and a new category of "multi-tied" adviser who is not independent but sells products from a small number of companies they have done a deal with.

Speaking on BBC Radio 4's Money Box programme Stephen Ingledew, Commercial Director at Barclays Financial Planning, said:

Barclays will select the best products from the best companies in the market
Stephen Ingledew, Barclays
"We do believe that the majority of independent financial advisers will move to the 'selected choice' approach of having a range of companies available... in the next two to three years."

Mr Ingledew confirmed that this was the approach Barclays would take. At the moment it sells its own products plus some from Legal & General, and it has its own IFA division.

"Barclays will select the best products from the best companies in the market and have a selected choice for our advisers to make available to customers.

"We can have some influence over the design of the products and also some of the financial benefits can be passed back to the consumer," Mr Ingeldew added.

Financial incentives

It is the first change in the rules governing the sales of financial products for more than 16 years.

The Financial Services Authority (FSA), which has introduced the change, denied that it will put pressure on independent financial advisers.

Dan Waters, FSA Director of Retail Policy told the programme:

"I think people are concerned about that, but we do not see this change as a threat to the IFA sector.

I think we are gradually going to see an erosion of the independent market
Nick Bamford, IFA
"Talking to them, they do not see the incentives to change their status from independent advisers."

But Nick Bamford, the past Chairman of the Society of Financial Advisers, who runs his own IFA company, Informed Choice, said Mr Waters is wrong:

"Let us be clear, there will be financial incentives for independent financial advisers to move their business model to multi-tied. And I think we are gradually going to see an erosion of the independent market. Over time it could disappear.

"Or it could be that independent financial advice is solely available to those people with money."

'Key facts'

Under the new rules customers will be given a document labelled "Key Facts" which sets out whether the financial advisor is independent, tied to just one provider, or multi-tied.

It will also set out what the advisor will charge, either as a fee or through commission, together with the average charge in the industry.

But Nick Bamford said there will still be confusion, because the multi-tied advisers will not be able to find the best deal for their customers from the whole market.

He told the programme: "I fear what we will witness will be pseudo-independence, people and organisations stating that they are choosing the best providers and the best products. But that will not be true.

"If you want the best products from the best providers you embrace the whole of market model and remain independent financial advisers."

BBC Radio 4's Money Box was broadcast on Saturday, 27 November, 2004 at 1204 GMT.

The programme was repeated on Sunday, 28 November, at 2102 GMT.

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