A white-label solution to polarisation
The polarisation debate has gone quiet in recent months but it certainly hasn't gone away. There is ...
The polarisation debate has gone quiet in recent months but it certainly hasn't gone away. There is still plenty of life left in the OFT report on this issue which came out last year and has seemingly sunk without trace since. The significance of the report is not so much in its conclusions as what it has sparked off elsewhere.
The OFT has a statutory obligation to investigate what it sees as anti-competitive behaviour and then conclude whether or not this is justifiable. Overall it decided polarisation was justified when it came to life and pensions business but not when it came to investments.
The Treasury reacted to this by getting the FSA to start its own review and the FSA has in turn handed the issue over to an economic consultancy called London Economics, which is due to report back over the summer.
The result is that the polarisation issue may well be back on the cards by late summer or early autumn, depending on what the FSA decides to do with the fruits of its consultancy. No doubt it will not want to produce a fudged issue with multi-ties working in one part of the financial services industry but not in another. One possibility is the emergence of 'white-labelling', a concept which seems to owe more to developments in the market than regulatory change.
Essentially this would allow a provider to buy in products and services from third parties but brand and sell them as their own. It effectively takes the multi-manager fund link proposition being put forward by the likes of Scottish Amicable, Winterthur and Skandia a stage further and drops the name of actual fund manager. The obvious advantage to a direct sales organisation would be it gives it access to a full range of own-branded products. Should such a development take place where would this leave the intermediary?
While it gives the direct players a more complete arsenal it does not sound the death-knell for independent intermediaries. There is no reason why the concept of true independence should not remain and why trade bodies such as AIFA cannot promote the values attached to this. By being able to offer the full range of products branded by providers, intermediaries would effectively be demonstrating their independence whereas direct organisations could only ever offer their own.
It is arguable that white-labelling is multi-ties by the back door but it would be truer to see it as outsourcing. If the FSA comes out in favour of white-labelling it is something the IFA market will have to accept with good grace. It is not a long term threat and it is far from the worst conclusion that could have been predicted when the polarisation debate started at the end of the 1990s.
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