'Some decided that because of the range of advice they're going to be able to give, they didn't really need authorised adviser status'

How have brokers reacted to policing by the Central Bank? Since last year, both authorised advisers and multi-agency intermediaries have had to meet a series of tougher statutory obligations - so tough that less than half the number of brokers expected to register actually did.

Application forms were sent to more than 6,000 brokers but only 1,700 will be registered as restricted activity investment product intermediaries, which, following lobbying by brokers, will now be known as multi-agency intermediaries. Some 150 of these will sell the products of just one company.

The process is not yet complete, with about 100 outstanding cases, according to Mr Con Horan, head of retail investments and insurances supervision at the Central Bank, but it is expected that around 650 firms will receive recognition as authorised advisers out of 800 original applicants and should be able to give advice on the full range of investment products available.

The remaining 3,500 intermediaries who were contacted by the Central Bank fall into several categories. About 200 brokers will be designated authorised cash handlers and will be permitted to accept cash from clients.

Others have left the business, either through retirement or mergers. In addition, many auctioneers or estate agents, who may have carried out limited work in the sector, and others who sold insurance products on an incidental basis, would also have decided against continuing in the new regime.

Any broker that did not apply to continue business before July 2001 can no longer legally engage in business. But consumers can still avail of advice provided by accountancy firms and solicitors authorised by their professional institutes.

Some 150 brokers withdrew their applications for authorised adviser status, according to the Central Bank. "Some decided that because of the range of advice they're going to be able to give, they didn't really need authorised adviser status and were quite happy remaining restricted intermediaries. To others it would have been made clear that they wouldn't have received authorised adviser status," says a Bank spokesman.

One broker that changed its mind was the Phoenix Group. "We originally applied for authorised adviser status but, for fear of being called up on any impropriety and for fear of making some kind of error, we decided to stick with restricted intermediary," says Phoenix director Mr Vincent Coughlan.

Initial fears that the word "restricted" in its official title might be bad for business proved unfounded in its case, he says. "We got that changed to multi-agency intermediary but, to be honest, it wasn't that big a deal. It's not that substantial a difference to the man on the street," says Mr Coughlan. Clients were not suddenly going to leave, he added

Mr Michael Kiernan, chief executive of authorised adviser MyAdviser, agrees that most people do not recognise the difference between the two types of broker. "But over time, people will become increasingly aware of the distinction.

"As an authorised adviser you can say to people that the service you offer is totally independent and that's an advantage I am happy to keep, instead of just saying, well people don't understand the difference," he says.

Although some brokers may have found the regulatory changes "quite onerous", Mr Kiernan says he is not a typical case as MyAdviser was only set up last year. "We've never operated any other way and we haven't found it difficult to meet the compliance process," he says.

One difficulty authorised advisers can face is gathering information on the products of the companies that sell directly to the public. "They don't always release information to brokers. You have to go covertly to them so you can provide the information to clients," says Mr Kiernan. This means ringing up as an individual customer - "awkward and time-consuming", he says.

The amount of extra work involved for brokers means there is a temptation to cut corners, according to Mr Hornan. In July, the Bank wrote to brokers reminding them they were required to prepare a detailed statement of the reasons why a product is considered suitable for the client. The action was taken because, in several inspections, the Bank found brokers were using standardised "reason why" letters, where the only difference between the letters was the name of the product and the name of the client.

Mr Coughlan says that, despite an overly stringent first draft, the Phoenix Group favours the new rules and regulations laid down by the Central Bank and hopes it will lead to more consumer faith in brokers.

He does not feel drowned by the paperwork, he says, because of the ideology that existed at Friends First, where all three directors worked before setting up on their own. "They adopted a system similar to the factfind regulations in 1993. We had to do a factfind as thick as your arm before we could recommend anything to anyone."

Factfinds are not always appropriate, says Mr Diarmuid Kelly, chief executive of the Professional Insurance Brokers Association. "Factfinds are fine when you are working with a new customer but when you're dealing with someone you have known as a customer for 20 years, there might be some reaction against pulling out a four-page document that's to be filled out." Simple products like SSIAs should not require factfinds, he adds.

Brokers need to be able to strike a balance, agrees Mr Stuart Reid, manager of the Irish Brokers Association. The same degree of interrogation cannot be applied to everything. "The adviser must satisfy himself that they have significant information to advise their clients. The smaller policies would need a smaller amount of information."

But while Mr Kelly is unsure if the new regulatory regime is workable, Mr Reid is more positive about the changeover, describing it as a difficult process but one worthwhile for brokers.