FSA PLANS COULD OPEN DEEP CHASM IN INDEPENDENT FINANCIAL ADVICE

12.00.00am BST (GMT +0100) Thu 1st May 2003

There will be a deep chasm opening between the growing demand for independent financial advice and the diminishing supply if the latest Financial Services Authority plans are put into action according to Vince Cable MP, Liberal Democrat Shadow DTI Secretary.

Dr. Cable said: "Consumer groups are extremely alarmed that the Financial Services Authority is insisting on removing the rules which govern the independence of financial advisers. There will be inevitable conflicts of interest under the proposed new system."

"There is the very real possibility that, at a time when access to independent financial advice is critical to enable consumers to bridge the savings gap with confidence, the availability of truly independent advice will diminish.

"It is crucial that the high sounding promises of Government to introduce a network of local and generic financial advice, particularly for those on lower incomes, become a reality."

"A network should be made available through the Citizens Advice Bureau and Post Offices, providing high quality, independent generic financial advice. This should be funded by a small levy on the Financial Services industry which has every interest in restoring confidence in its own products to increase the volume of savings."

"ENDS (see Notes to Editors)"

"Notes for editors:"

"The Financial Services Authority has consulted on proposals to remove "Polarisation" rules, which currently insist on Financial Advisers being totally independent or tied to one product provider. Genuine independence of Financial Advisers is important for consumers."

"A survey conducted by NOP between 11-13th April 2003 for IFA Promotion, found that 43% of UK adults said the Government had made them less inclined to save. Worse still, almost half (47%) of people on low incomes said the same thing."

"The Liberal Democrats support the development of independent financial healthchecks. These healthchecks would be provided by Citizen's Advice Bureau and other trusted community based organisations - and they would allow consumers to obtain genuinely independent and unbiased assessments of their financial circumstances, and any savings, investments and debts."

"The independence of these healthchecks would assist consumers whose confidence in financial institutions has been undermined (for example by the mis-selling scandals concerning personal pensions and, more recently, split capital trusts), and this would in turn be to the advantage of financial institutions themselves. Consequently, this scheme should be funded by the financial services industry."

"This plan was initially supported by the Government in its response to the Sandler Review into the market for medium and long-term retail savings. Ruth Kelly MP, told the House of Commons on 9 July 2002 that:"

"Those on lower incomes also have a need for financial advice. Citizens advice bureaux and other money advice centres across the country offer good-quality, impartial advice to many people in financial difficulty. People have argued that their remit should cover financial advice more generally. I am pleased to say that the FSA has offered to fund research into extending the role that those organisations might be able to play. I welcome that, and look forward to seeing the results."

"In its Green Paper on Pensions (Simplicity, Security and Choice - Working and Saving For Retirement, issued on 17 December 2002), the Government's focus had shifted, with focus on the possibility for: "producers and distributors to develop a market for generic financial advice to help those on moderate incomes to identify their financial priorities and to save where it seems sensible for them to do so". (DWP emphasis)"

"In his statement to the House of Commons introducing the Green Paper, the only comment on this topic from the Rt Hon Andrew Smith MP the Secretary of State for Work and Pensions was that:"

"To broaden access to advice, we will work with the Financial Services Industry to develop mass-market financial advice in high street banks…"

"This means that consumers will be asked to pay for advice - and they would be getting it from the very people who want to sell them financial products.