Doom for high-street IFAs

Dozens of independent financial advisers (IFAs) are expected to close, retire or sell to bigger firms in the wake of sweeping changes to be announced by the Financial Services Authority on Monday. The FSA, which this week announced a radical new regime for credit unions and began an overhaul of with-profits insurance policies, is poised to scrap the polarisation principle governing financial advisers.

Polarisation, which was laid down by the FSA's predecessor, the Securities and Investment Board, made advisers declare whether they were independent and able to sell any financial products, or tied to one particular provider. Sir Howard Davies, the FSA chairman, has long declared his belief that polarisation does not protect investors, and the industry is braced for the removal of all distinctions between types of adviser. Instead, they would be bound by their existing duty to be "clear, fair and not misleading".

But Monday's declaration is expected to lead to far-reaching changes in the structure of the advisory industry. Thousands of one-person high-street IFAs operate in the belief that many consumers prefer this to someone selling the products of only one provider. If the IFA is, effectively, to be abolished, a large proportion of this breed may decide it is not worth the expense of working alone and, instead, close or sell out.

The move against polarisation, which has never been popular with the big insurance and investment groups, began in August 1999 when the Office of Fair Trading recommended its abolition for collective investments such as unit trusts. In November 2000 Sir Howard told the Chancellor, Gordon Brown: "We cannot advise you that polarisation is necessary to protect investors in the long term."

And when stakeholder pensions were launched last April they were specifically exempted from the polarisation regime.