If your firm holds itself out as an independent intermediary then it must offer advice across the whole market of packaged product providers. IFAs need not necessarily provide advice on all product types, but instead may specialise in certain areas (e.g. annuities and pensions). COB 5.1.16 R (1) states that an independent intermediary must at all times act in the best interests of its private customers when advising on packaged products. It must not enter into any commercial arrangement that may adversely affect its ability to provide independent advice ( COB 5.1.16 R (2)).
Offering independent, whole-of-market advice does not mean that for each and every customer the firm must search the entire market of packaged products. IFA firms may maintain a panel of preferred packaged products selected from those generally available in the market, based on the criteria of quality of product and general suitability for customers. So long as the panel is made up of products from a sufficiently large number of providers, is selected against definite criteria which are applied equally, and is reviewed regularly (and whenever significant market changes require it) we consider the practice acceptable. We would always expect an IFA using such a panel to have written instructions describing the criteria to be applied in selection or review of products and to maintain a full written record of its initial selection and subsequent reviews.
The polarisation rules apply only to packaged products. They do not apply to mortgages or pure protection products for example. So, an IFA may be restricted to one or more companies for the purpose of advising on non-packaged products, and still act 'independently' in relation to packaged products.
The detailed rules and guidance relating to Polarisation can be found in COB 5.1.
We do not propose to remove the polarisation rules until a further Consultation Paper (covering the so-called 'menu' and transitional rules) is published and the necessary changes have been made to the Handbook. If your firm then wishes to take advantage of the removal of the polarisation restriction, it may do so, providing that it is at the same time in a position to comply with the new obligations that go with it. Following a transitional period all firms will be required to comply with the new rules.