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SIFA 9.7 Polarisation: Effect of the rules

SIFA 9.7.1G

Polarisation only applies to advice relating to packaged products, which are life policies, personal pensions, collective investment schemes, stakeholder pensions and investment trust savings schemes.

SIFA 9.7.2G

Polarisation requires firms that advise on packaged products to be either:

  1. (1)

    independent intermediaries (IFAs) who sell products from the whole market place; or

  2. (2)

    representatives selling on behalf of a single company (or group).

Independent advice

SIFA 9.7.3G

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)).

SIFA 9.7.4G

An IFA can be the appointed representative of an IFA network or another IFA. In this case, the network, or principal, is responsible for the training and competence of the IFA and for ensuring compliance with the FSA rules.

SIFA 9.7.5G

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.


SIFA 9.7.6G

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.

Reporting requirements

SIFA 9.7.7G

Monitoring of business placement: your firm is required to inform us when it places 20% or more of its business with a particular provider together with its reasons for doing so. This is a question in the Annual questionnaire at SUP 16 Ann 7 .

What are the relevant sections of the Handbook?

SIFA 9.7.8G

The detailed rules and guidance relating to Polarisation can be found in COB 5.1.

Upcoming developments

SIFA 9.7.9G

In CP121 and CP166 we have outlined plans to abolish the polarisation regime. To continue to have 'independent' status firms that advise on packaged products from the whole of the market will have to offer customers the opportunity to pay by fee.

SIFA 9.7.10G

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.

SIFA 9.7.11G

For more information on the upcoming changes to the polarisation regime please see CP166, 'Reforming Polarisation: Removing the Barriers to Choice'.