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U.K. Scandal Lingers Against Advisers

A scandal that broke about five years ago continues to dog U.K. intermediaries, said Martin Cross, a London-based analyst for the British firm Teather and Greenwood.

IFAs were encouraging large numbers of retirement investors to abandon their corporate defined-benefit plans and sign up for personal, free-standing contribution plans, he said. The problem was that "it was almost child's play to see that it was the wrong decision" for many investors, Cross said. "They didn't ask enough questions about a person's circumstances. That was the single, most grievous sin."

The graft became known as the Pensions Miss-selling Scandal, and many investors haven't forgotten it, Cross said. What is more, some IFAs have been wooed by fund complexes that offer inflated commissions to talk up their products, he said, rendering moot the idea of "polarization."

As a result, many regard the distinction between tied agents and IFAs as shelter for intermediaries, giving them false credibility, Cross said. That sentiment may result in a controversial initiative to cast the distinction aside.

"They're like lawyers," he said of IFAs. "They have a poor reputation."