Financial plannning: Tied agents may be attractive but there's a catch

Talking to an independent adviser is often presented as the sole option for those of us with a range of financial needs. But in some cases, salespeople who are only able to advise on their company's products can be an acceptable alternative. Simon Read dons his cricket pads to tell us the score.

If Yorkshire County Cricket Club hadn't relaxed its eligibility rules, it's fairly unlikely that the team would have remained a force in county cricket. Until relatively recently, players had to be Yorkshire-born to play for the county. So while other teams picked from the best in the world, Yorkshire was limited to its own.

The practice was clearly nonsense. In much the same way, comparing a tied agent to an independent financial adviser (IFA) could be said to be nonsense. From one you'll be offered a choice of the best products across the market while the other will only be able to offer you products from his or her own company.

Yet many tied agents are very successful. Why? Partly because we're all lazy and partly because many tied agents are good at their job and offer decent advice.

The problem with tied agents lies not necessarily with the salesmen themselves, but with their limited product range. When it comes to looking at an individual's situation and recommending a course of action, both an IFA and a tied agent could end up with the same answer.

The difference is that an IFA will recommend the best pension, PEP, or whatever from across the whole market while a tied agent will be limited to offering his or her own company's product, whether it's any good or not.

"I think that, in all morality, somebody should not be allowed to sell to the public unless they can offer a range of good products," says IFA Alastair Conway, managing director of Clark Conway. "The idea that people feel they are getting good advice from a tied agent is wrong."

This view is typical of most IFAs. They are fiercely proud of their independent status and it is clearly galling for them to see so many people buy financial products through a tied agent. Worse is the danger that, by choosing a tied agent, people end up with the wrong products.

Yet this view is disputed by companies that use salespeople. Allied Dunbar runs one of the most successful networks of tied agents in the country. "Our agents offer good professional advice," says an Allied Dunbar spokesman. "We spend a great deal of time and money training them properly, above and beyond the standards set by the industry. Additionally, our agents have the ability to offer the best possible service, in terms of ease of access and client servicing. They deal with one system which they understand very well, and so can spend more time meeting clients' needs."

Large insurance companies also offer unique confidence and security, according to Allied Dunbar. "We offer a guarantee that if one of our advisers has offered the wrong product or wrong advice, we'll offer compensation and put the client back in the right position. IFAs may not have the backing to do that."

When it comes to products, most insurance companies offer much the same these days, claims Allied Dunbar. Therefore it doesn't matter so much which product you buy - what matters is the advice you get. This is a debatable point. If a tied agent cannot actually offer the best product for a particular customer, it is unlikely that he or she will admit that and tell a customer to go elsewhere.

In reality, the tied agent is more likely to make the foot fit the shoe, rather than the other way round.

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