Depolarisation 'has failed consumers'

Depolarisation has failed in its objectives because consumers have not received greater value, according to speakers at the FSA retail intermediary conference.

Chris Cummings, director general of the Association of Independent Financial Advisers (Aifa), revealed the organisation’s latest figures showing the business written in investment and protection by multi-ties, whole of market and independent financial advisers.

On the investment side, IFAs still write 90% of the business, followed by whole of market advisers with 25% and multi-ties with 3%.

In protection, IFAs write 87% of the business, whole of market advisers write 20% and multi-ties write 4%.

Ken Davy, chairman of SimplyBiz, says it was not clear what the goal of depolarisation was when the FSA introduced it in June 2005, but if the goal was to get rid of IFAs or give consumers more value, it has failed.

He states: “Depolarisation has failed in its objectives because the marketplace has not been dramatically affected. Given the effort and cost that went into it – consultations, debate, developing systems and training – I would be cynical about people saying it is a success.”

Davy believes consumers were meant to benefit from depolarisation by having increased choice and value in the products they buy.

But while multi-ties exist and there is an aura of choice in some banks, Davy believes it is “pretence” because the products themselves are not better value.

Indeed, he states some products are more expensive because the objective of some banks is to create high margins, rather than improve products for consumers.

He adds: “I’ve yet to see a multi-tie operation that has provided a fundamentally better service for the consumer.”

More positively, he believes the “saving grace” of depolarisation is there has been virtually no effect on the IFA sector, which is delivering real value to consumers.

Likewise, Mike Hughes, chief executive of Burns Anderson, says predications by some providers 18 months ago suggesting 59% of IFAs would be multi-tied by today has failed to come about.

Moreover, the network did launch a multi-tie division but none of its members wanted to join and have all remained independent so far.

But Hughes does think depolarisation has brought some benefits because it has been used as a catalyst by some members to review their businesses, including introducing fees and justifying their work to consumers.

He states: “Fee income has gone up four-fold because IFAs are telling consumers they are professional and this is what I charge, and most consumers accept this.”

Hughes says the average turnover by its members has gone up 30% this year and he believes some of this is as a result of depolarisation.

If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email emily.perryman@incisivemedia.com.