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UK Regulatory Regime For Financial Advisers Reformed

by Robin Pilgrim, LawAndTax-News.com, London

02 December 2004


The UK's Financial Services Authority on Wednesday unveiled new regulations for financial advisers, designed to remove the artificial restrictions of the old system of 'polarisation', increase the range of products available to consumers, and give them a clearer picture of what they are paying for advice.

Under the old system, advisers could offer 'independent' or 'tied' advice. Independent advisers offered products from the whole of the market, whilst 'tied' advisers were limited to the products of only one provider.

However, following removal of the polarisation restrictions, it will be possible for firms to offer advice from the whole of the market, from a limited number of providers, or a single provider.

Speaking on Monday with regard to the new regulatory regime, Dan Waters, FSA Director of Retail Policy, explained that:

"This is a groundbreaking initiative which will encourage competition and innovation. The majority of customers use tied advisers, from branches of high street banks and building societies for example, and they can now be offered a wider range of products from a variety of providers. Essentially consumers will have a far greater choice."

The new rules also contain provisions to ensure that consumers will get much clearer information about the service their adviser offers, and that they receive an indication up front of the costs of these services. This information will be given through two 'key facts' documents.

According to an FSA Policy Statement, the depolarisation rules will be implemented over a 6 month transitional period, which began on December 1st. During this time firms may either continue to be regulated under the present rules, or notify the FSA that they wish to adopt the new rules. If they chose the latter option they will have to be able to comply immediately with all of the new rules, including the requirements to provide customers with the 'key facts' documents.

At the end of the six month period, on 1 June 2005, all firms will need to be compliant with new rules, and the depolarisation process will be complete.


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