Review may lead to a better deal

Consumers are set to get a better deal when they buy financial products, following a review of the industry by the UK's top financial regulator.

Intermediaries who sell savings and investment products are likely to alert people to a larger range of products on offer than many currently do, and are expected to point out the best deals on the market more frequently, under proposals drawn up by the Financial Services Authority (FSA).

At the moment you can buy a financial product in two different ways: go to the equivalent of a "supermarket" which stacks every brand available, or opt for a shop which sells, for example, only Heinz products.

In the world of financial products, having these two alternatives is defined under law and is called "polarisation." The choice for consumers when buying a pension, say, is between an independent financial adviser (IFAs-the supermarket) and an agent tied to a particular company (the one-brand shop).

Tied agents sell only the product ranges that are produced by a particular company. In contrast IFAs are obliged by law to consider the whole market and give advice to customers about what would be most suitable for them.

Currently, the majority of products are sold by tied agents, as most of the major banks, life companies, and even new entrants like supermarkets act through, or as, tied agents.

While details of the FSA's proposals have to be considered by the Treasury before they can come into force, many in the industry expect the introduction of a system called "multi-ties", where agents can sell their own company's products alongside those of a panel of other providers. But it is expected that the practice of being completely tied, or completely independent, will continue.

The change has received a mixed reception from the industry. John Reeve, of the Family Assurance friendly society, says the new system will give customers a wider choice. Mr Reeve says: "At present specialist products, like the tax-exempt savings offered only by friendly societies, are not sold widely because most large distributors are tied to life assurance companies. The change would make a huge difference as our products and those of other companies could be slotted into a wider range on offer."

However, others warn that multi-ties will create more confusion. Mark Howard, of the IFA Maddison Monetary Management, says: "People already do not properly understand that you can either go to a tied agent or an independent adviser, so this new layer will make it even less clear. It would be wonderful if tied agents were banned altogether as they tend to sell the worst value products on the market."

Russ Brady of the Co-operative Insurance Society (CIS), disagrees. CIS, which sells to customers through tied agents, regularly has products in the best buy tables. Mr Brady said: "We don't feel this will threaten us as our range is comprehensive. Considering there are four million people in Britain without proper access to financial services, there is plenty of room for expansion for the whole industry."

For those hoping for reform in the way you buy your financial services, radical change is not just around the corner. The Government reckons if you know what you are buying, even if it is not the most attractive offer , you cannot complain. But it also thinks that bringing an end to hard and fast rules on polarisation will open up useful options for companies and consumers alike.