Depolarisation is about the value and cost of financial advice and of increasing the choice of products to consumers. The impact of depolarisation, along with the transfer of regulation of mortgages and general insurance products to the FSA and the introduction of stakeholder is set to bring about changes in the distribution of financial products.

The depolarisation rules that came into effect on December 1st 2004 created three groups:

independents: offering ‘whole of market’ advice

About depolarisation…

Depolarisation is about the value and cost of financial advice and of increasing the choice of products to consumers. The impact of depolarisation, along with the transfer of regulation of mortgages and general insurance products to the FSA and the introduction of stakeholder is set to bring about changes in the distribution of financial products.

The depolarisation rules that came into effect on December 1st 2004 created three groups:

independents: offering ‘whole of market’ advice

multi-tied: offering a limited range of products from a small number of companies

single-tied: advisers tied to a product provider – similar to current tied definition.

Firms must decide by June 1st 2005 the approach they intend to take. They must also introduce a menu of options to consumers to show how advice is to be paid for.

Currently intermediaries dominate the distribution of financial services in the UK but their position is under threat as size, access to capital, a tough regulatory regime and falling commission levels are increasing pressure for sector consolidation and rationalisation with the banks waiting in the wings.

About Mintel’s research:

With the depolarisation transitional period well under way, this report offers you a unique means of:

assessing the impact of changes in the operating environment for IFAs in the period since the last report

examining the likely consumer response to the new advice regime through specially commissioned research

evaluating the likely outcome for the structure of the IFA sector post-depolarisation.

As well as providing findings from exclusive consumer research, this report brings together all the latest relevant data sources. A number of trade interviews have also been undertaken to gauge sentiment on the implications of depolarisation on IFAs and the broader retail financial services market.

Intriguing findings include:

Some 28% of adults (13 million consumers) would use an IFA to gain a greater understanding of financial matters. This compared with 42% who would use a bank representative (19.5 million adults), 39% friends and family (18.1 million) and 28% (13 million) the Internet.

The need to improve the advice given to consumers in relation to financial products is reflected in the fact that ‘not properly advised’ (29%), ‘being misled’ (24%) and being ‘rushed into it’ (24%) are the top three reasons for financial product purchase regret.