The Financial Services Authority has delayed its reform of the financial advice industry until late 2004 as it makes substantial changes to its original proposals.
This delay is hitting financial services intermediaries with the largest one, Sesame, which sells a quarter of products bought by the public and has more than 6,000 advisers, admitting that its planned £150m flotation next July probably "no longer makes sense".
The FSA said its reforms of the financial intermediary industry, called depolarisation, would probably take place in the second half of 2004. Currently, financial advice is polarised between tied advisers, selling the products of just one company, and independent financial advisers, selling from the whole of the market.
The regulator had said it would allow advisers a greater choice in how many providers' products they sold. Consumers would be able to pay for this advice either through the charges taken by providers and handed on to the intermediary - commissions - or directly to the adviser in fees. The FSA had initially said that, in the future, independent financial advice could only be provided by someone taking fees and advising on the whole of the market.
However, the estimated 36,000 existing independent financial advisers complained, as they feared a loss of business and have forced the regulator into a U-turn. The FSA, in a January consultation paper (CP166), said it would allow intermediaries to offer a menu of payment options (fees or commissions) on the products advised.
But the FSA has not worked out how this can be achieved and it is now expected to release its consultation document in December.
Louise Buckley, a spokeswoman at the FSA, said: "We expect to release the feedback given on CP166 and how the menu will work by the end of 2003. This means depolarisation is not expected until the second half of 2004. It is fair to say the menu has led to a delay in depolarisation."
Some intermediaries have questioned even this renewed timetable. Martin Davis, the commercial director at Sesame, which is owned by financial software group Misys, said: "Depolarisation could be pushed out until the end of 2004, or possibly 2005."
Misys said in July 2002 that it would float its IFA arm within two years, depending on market conditions and the regulatory environment. Stockbroker Durlacher said a flotation could value the group at £100m to £150m.
Mr Davis said: "It probably does not make sense [to float] when we do not know the regulatory environment. Clearly, we still plan to float and this is still our general timetable."
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