OFT's third way might just work
Sunday 08 August 1999
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.
- 1 Home Office says Nigerian asylum-seeker can’t be a lesbian as she’s got children
- 2 What happens to your body when you give up sugar?
- 3 Japanese island overrun with cats after population explodes
- 4 Apple and Google users being spied on for a decade because of 'Freak' security flaw
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
The City of the Monkey God: Archaeologists claim to have found city lost for 1,000 years in remote Honduran jungle
Japanese island overrun with cats after population explodes
Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
Bubonic plague-carrying fleas found on New York City rats
London property boom built on dirty money
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...