Regulatory change generating return to a tied-agency past

An international media symposium in New York has been told that the cost of advice will rise and that up to 75 per cent of the United Kingdom's independent financial advisers may leave the industry as a result of forthcoming regulatory changes outlawing commissions.

The corporate vice president and director of international research at specialist financial services consulting association LIMRA, Jennifer Berlin, told the symposium the regulatory changes being pursued in both the UK and Australia might ultimately lead to major companies returning to the tied-agent models they had pursued in the past.

Describing a situation not unlike that in Australia, Berlin said research conducted in the UK had suggested that while clients were happy to shift from commissions to fee for service, few of them had any real understanding of what they would then have to pay.

"They've indicated they're happy to pay 25 pounds for financial advice, not what it might ultimately really cost," she said.

Discussing the impact of the regulatory changes on the insurance environment, Berlin said assessments had been made that it could give rise to millions of "orphan" policy-holders - something that was prompting many companies to consider returning to quasi tied-agency arrangements.

Berlin also pointed to reports that a class action was being mounted, aimed at having insurance companies return pre-paid trailing commissions to clients no longer using their financial advisers.

"I believe there is a genuine feeling among some financial advisers in the UK that the regulators are just trying to get them out of the industry," she said.