Personal finance

Of two products of equal worth, the one likely to be recommended is the one paying higher commission to the IFA

ARE WE about to see the end of truly independent financial advice? The Office of Fair Trading is preparing a report on the question of "polarisation". This is a rule which forces insurance salespeople either to sell the products of just one financial provider, or to become fully independent, able to recommend any policy.

The OFT is believed to be hostile to polarisation, arguing that it has failed consumers and that a different system, called "multi-ties", would be a much better option.

Under the multi-tie system, salespeople would not be restricted to just one company's products, thereby making much of what they have to say worthless. They could select up to half a dozen firms on the basis of whether each one has something of value for their clients.

Independent financial advisers are arguing that this half-way house is not true independence. Consumer choice would be restricted to a handful of companies and their products, leading to a situation where the size of commission paid by the provider might determine whether the salesman decides to link up with it.

All of this is true. Except that the criticisms of multi-ties mirror the behaviour exhibited by many self-styled independent financial advisers themselves. All too often IFAs operate through a limited cartel of companies. If an IFA is a member of a "network", an organisation which handles admin work, carries out research and deals with financial watchdogs in return for a slice of that IFA's income, any advice is usually based on a tightly- circumscribed list of providers. The reality is that, as often as not, it is also based on the amount of commission negotiated by the network. Put bluntly, of two products of equal worth to a client, the one most likely to make it on an advice panel is the one paying better commission.

I firmly believe in the value of independent financial advice. Had you asked me two or three years ago whether I was in favour of keeping IFAs and salespeople completely separate in terms of how they operate, I would have said yes. Today, I'm not so sure.

IFAs have allowed their role to become blurred. If they want to defend their current position they will have to try much harder than they are at the present.

A PHONE call from one of our regular property writers, Ginetta Vedrickas. She tells me that the Government has scrapped plans to abolish DIYSO, a shared ownership scheme which has allowed housing associations to help thousands of would-be home-buyers who don't earn enough to take out a full mortgage.

According to Notting Hill Housing Association, the Government's decision to reprieve DIYSO for at least two years follows a recent article on this subject written by Ginetta for The Independent, among others that have also appeared in specialist publications.

This is excellent news, capping a week of accolades for our property section. Both Ginetta and Fiona Brandhorst, another colleague, were both commended for their work in the recent Halifax/Laing Homes awards. Fiona even walked off with one of the section categories. My congratulations to them both. And, indirectly, to you: the views of readers of The Independent count, or so it would appear from this story.