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Banks not prepared for FSA rule changes

Date: Wed, 18 Feb 04 Analysis

A new report claims banks are not prepared enough for the change in sales rules on how financial products can be sold.

Details of the new rules, due to be revealed later this year by the FSA, involves depolarisation - policymakers freeing up the regulations governing sales of financial products.

In a bid to make it easier for customers to save for the long term, the move follows fears that people are not doing enough to provide for old age, according to Reuters.

The change in rules will see the sales of pension and life insurance products taken away from independent financial advisers and consultants Datamonitor have claimed banks will struggle to do so.

Datamonitor predicts that by 2007 IFAs will retain up to 80 per cent of pension fund sales and 60 per cent of single life insurance policies.

Depolarisation is set to end the divide between IFAs who can sell anyone's financial product and tied agents restricted to selling one firm's product.

Expected to cash in on the move, which would allow banks to offer their customers products from several providers, up till now banks have not done enough to exploit the future changes according to Datamonitor.

Analyst at Datamonitor, Miikka Metsanvirta explained to Reuters: "Bank staff are not well trained at the moment to handle demand for life and pension products. Customers prefer to use IFAs because of their experience...this is something that banks need to sort out before they can really explore the market."

Some action has been taken by companies to shake up operations, Friends Provident revealed it was closing its direct sales force in response, Prudential ended its hallmark door-to-door sales approach and many banks have linked deals with fund management firms to let them sell products to their clients.

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