FSA Consultation Paper 121 and the move to depolarisation ‐ A critical analysis
| Published date | 01 September 2002 |
| Date | 01 September 2002 |
| Pages | 243-253 |
| DOI | https://doi.org/10.1108/13581980210810238 |
| Author | Patrick Ring |
| Subject Matter | Accounting & finance |
FSA Consultation Paper 121 and the move to
depolarisation — A critical analysis
Patrick Ring
Received: 25th February, 2002
Division of Risk, Britannia Building, Glasgow Caledonian University, City Campus,
Cowcaddens Road, Glasgow G4 0BA, UK; tel: +44 (0)141 331 3151; fax: +44 (0)141 331 3229;
e-mail: p.ring@gcal.ac.uk
Patrick Ring is a lecturer in financial ser-
vices at the Division of Risk, Caledonian
Business School, Glasgow Caledonian
University. He is a qualified solicitor who
has worked in the pensions industry for a
number of years. His research interests
include pensions and regulatory issues.
ABSTRACT
The Financial Services Authority’s (FSA)
Consultation Paper 121 suggesting depolarisa-
tion in the retail financial services sector has
generated a great deal of debate. The motivation
for the reforms, primarily to improve the posi-
tion of the consumer, cannot be disputed.
Nevertheless, in attempting such a wide-sweep-
ing change, it is clear that the reforms could
bring difficulties as well as improvements. This
paper argues that, to the extent that the current
polarisation regime is detrimental for the consu-
mer, this can be addressed without dismantling
the basic framework of the current advice
system. It acknowledges that there is a need for
greater consumer education in this area, and
that more needs to be done to address the needs
of lower-income consumers. Nevertheless, it is
argued that the advantages anticipated as a
result of the more radical reforms in the Consul-
tation Paper are likely to be accompanied by
problems that could negate the overall benefit
accruing to consumers.
INTRODUCTION
On 1st November, 2000, Howard Davies,
Chairman of the Financial Services
Authority (FSA), wrote to the Chancellor
of the Exchequer advising ‘The conclusion
we have reached is that we cannot advise
you that polarisation is necessary to protect
investors in the long-term’.
1
He therefore
proposed that the FSA would undertake a
two-stage consultation on polarisation.
The first stage, relating to stakeholder pen-
sions, ISAs and direct offer advertisements
was set out in the FSA’s Consultation
Paper 80,
2
and implemented in April,
2001. Now the FSA has published Consul-
tation Paper 121, entitled ‘Reforming
polarisation: Making the market work for
consumers’.
3
Polarisation is the current advice regime
for packaged products — essentially life
assurance, pensions contracts and collective
investment schemes. Until now, consumers
in the retail financial service market have
had two distinct choices when seeking
advice on packaged products. They can
either seek advice from a ‘tied’ adviser,
who works for a product provider or is an
agent of that provider, and who can advise
only on the products of that provider; or
seek the advice of an independent financial
adviser (IFA), who must advise on pro-
ducts across the market.
Journal of Financial Regulation and Compliance Volume 10 Number 3
Page 243
Journal of Financial Regulation
and Compliance, Vol. 10, No. 3,
2002, pp. 243–253
#Henry Stewart Publications,
1358–1988
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