Independent Financial Adviser - Depolarisation

Depolarisation

On 1 December 2004 the Financial Services Authority (FSA), the UK financial regulator, changed the rules governing financial advisers. Previously (under a system known as ‘Polarisation’) there were only two types of financial adviser, those who would advise and sell only one company’s products - known as a Tied Agent, and those who would advise and sell the most suitable products from the whole of the market – Independent Financial Advisers (IFA).

With Depolarisation, the FSA has changed this dramatically. A firm may now offer advice on products from just one provider (single tied), more than one provider (multi-tied) or from the entire marketplace (whole-of-market). Generally speaking, to be able to call itself "independent", a firm must offer its clients the option of paying for the advice by a fee and must be a whole of market adviser.

There are a few complications however :

1. A firm may hold themselves out as being whole of market for one class of product such as investments, but be multi-tied on another, for example pensions.
2. An adviser can start a relationship with a client as a single tied adviser, but can then broaden the scope of advice to multi-tie or whole of market advice (he cannot decrease the scope of advice he offers though). If he does this he must re-disclose his status to the client.

The regulations that introduced regulation for mortgages and general insurance (GI) were developed and introduced around the same time as the depolarisation rules (Mortgages 31 Oct 04, GI 14 Jan 05).