OFT's third way might just work

Maybe it is the silly season but personal finance keeps making the front half of the papers, rather than being tucked away inside the Sport section as usual. (A big welcome back this weekend to those fickle readers who abandon this part of the paper during the football close season).

Mis-sold endowments and unfair mortgages are still hot topics - see page 8 for Harvey Jones' account of his fixed-rate hell. But what you may have missed amid this frenzy was that the Office of Fair Trading (OFT) chose last week to launch an important report on the way we are sold financial services.

The OFT was investigating whether the present system of "polarisation" - meaning that salespeople either work for one company; or are totally independent - offers enough competition between advisers and the best deal for the buying public.

One option on the table was to recommend that only fee-charging advisers can call themselves "independent". The director-general, John Bridgeman, rejected this path, saying it could "cause confusion". Rubbish. This is an opportunity missed.

Many customers who visit IFAs don't fully understand how the adviser is paid. Unless clients are willing to pay fees (so far, few are) the advisers have to pile up the sales to generate enough commission to make a living. This leads to a bizarre cross-subsidy: for every nine people who take the useful advice sessions but don't buy a sausage, one sucker signs up for a pension and pays royally for it.

The OFT gets round the commission question by suggesting the new super- regulator, the Financial Services Authority (FSA) should look into whether advisers could make it clearer to customers that payment for their advice is included in commission. The other suggestion sure to go down a treat in the industry is that IFAs should tell customers they could share some of this commission with them.

The report concluded that the "tied or independent" distinction should be kept, with the option of a "third way" for some advice. This would mean salespeople who work for one firm could choose to sell stock market investments (ISAs, unit trusts and Oeics) from several companies. And an adviser who is independent for the purpose of selling you a personal pension could restrict his choice of fund manager.

Some IFAs only recommend a few managers. If they were to make that deal exclusive, they could get a better deal on payments. And many insurers and banks have a woeful track record when it comes to managing own-brand stock market investments.

It does make a kind of kooky sense.

Blue is the colour

As a shareholder in Loftus Road Plc, my wish for the new season is for Queens Park Rangers to win promotion (fat chance). I've gone right off blue hoops - buying blue-chip shares makes a lot more sense. The Motley Fool tells you how to spot the best top-notch companies on page 9.

n i.berwick@independent.co.uk

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence