Establishing whether a firm is an authorised adviser or a multi-agency intermediary is key step, writes Laura Slattery

Managing money can be a complex task, especially when you have large sums of it to invest in products such as life assurance policies, pensions, savings accounts, bonds and equities.

If just thinking about the hundreds of plans and schemes on offer in the Irish marketplace alone makes earning the cash in the first place seem easy, it's time to seek advice.

But where is the best place to find independent financial advice and what kind of service can consumers expect from a broker?

Next month, the Central Bank's newly-established consumer information unit will introduce the first in a series of leaflets on a range of financial issues. Titled Savings and Investments - Know Your Rights, the leaflet will be available through the national network of Citizen Information Centres, libraries and the Central Bank. "It will include the questions people should ask," says the regulatory body's consumer information officer, Ms Karen O'Leary.

Perhaps the first question a would-be investor should ask when approaching an investment broker is whether the company is an authorised adviser or a multi-agency intermediary - the two categories of broker introduced along with a new regulatory regime in April 2001.

An authorised adviser can advise clients on all products available on the entire investment and insurance market.

This is important because providers such as the main banks, credit unions, An Post, Quinn Life and Northern Rock do not sell through brokers.

A multi-agency intermediary, the new term for restricted activity investment product intermediary (RAIPI), can only provide advice on the products of companies with which they have written agencies. It should be clear to consumers exactly how many agencies a multi-agency intermediary has, so they can satisfy themselves that the broker is giving advice on a sufficiently wide cross-selection of products.

According to Mr Con Horan, head of retail investments and insurances supervision at the Central Bank, one aim of the new regulatory regime is to make a clear distinction between the two types of broker so consumers can know what kind of service they will get. "The client really has to make a judgment call," he says. Multi-agency intermediaries will question whether authorised advisers will send any significant proportion of their clients to the product providers that sell directly to the public. Authorised advisers, meanwhile, will naturally argue that the multi-agency intermediary is an inferior breed of broker, unable to provide a full service to consumers.

"The restricted intermediary could be dealing with a list of eight insurance companies and people might perceive that as totally independent, but it's not covering the main banks, Quinn Life and all the direct providers who do not sell through advisers," says Mr Michael Kiernan, chief executive of MyAdviser, which has authorised adviser status.

The Irish Brokers Association (IBA) made it a requirement for members to seek authorised adviser status. "For the consumer, the absolute number one difference is that the authorised adviser will give independent, broad-based advice; that's the major kudos attached to it," says Mr Stuart Reid, manager of the IBA.

The Professional Insurance Brokers Association (PIBA) adopts a different standpoint. Its criteria for membership haven't changed: brokers must act as agents for at least five companies.

"If you just consider life assurance, most brokers deal with nine companies. There are just three that don't sell through brokers - Quinn Life, Ark Life and Lifetime," says Mr Diarmuid Kelly, chief executive of PIBA. So multi-agency intermediaries can give consumers choice "on pretty much the entire market", he argues.

Multi-agency intermediaries do provide some "very, very healthy" competition for the main banks, says Mr Eddie Hobbs, finance spokesman for the Consumers Association of Ireland.

"There's nothing wrong with them. For people on a lower income, they do have a role to play. The problem is when they tell people they're independent when they're not."

While the jury is out on the Central Bank's consumer-friendly credentials, Mr Hobbs believes, the new regulatory system has at least rid the market of brokers which were more like "freelance salespeople" than the independent, impartial advisers they claimed to be.

Both types of broker must follow codes of conduct laid down by the Central Bank to protect consumers, resulting in more paperwork for the broker and the consumer, but more transparency, too.

Under the codes of conduct, the intermediary will have to draw up a statement of its terms of business.

This must explain how the intermediary is to charge for its services, including details of any commission the intermediary will receive if they sell the consumer a product from a particular firm.

In most cases, the intermediary will have to complete a written factfind outlining the client's financial objectives, investment experience and other facts about the client's financial position. The intermediary must also write a "reason why" letter to the client explaining why a transaction is considered to be in their best interests.

All of these measures protect consumers from brokers who steer their business in the direction of the product provider that pays them the most commission, regardless of whether the product is suitable for the client. As authorised advisers send clients directly to companies that will not pay them commission, they are more likely to charge consumers a fee for their service.

This does not mean that the services provided by brokers who rely on commission are free. The cost of commission will be a percentage of the contributions the client makes to their investment plan, shrinking the policy's value.

With a fee-based service consumers know what they are paying for, argues Mr Kiernan from MyAdviser. "I would definitely lean towards a fee-based service because it has automatic transparency. It separates the transaction from the advice," he says.

From the multi-agency intermediary camp, Mr Vincent Coughlan, a director of the Phoenix Group, says that as long as there is commission disclosure, consumers can shop around, while brokers will undercut each other to attract larger investors.

"I see no reason why people can't have value-for-money whatever route they choose," says Mr Coughlan. "You have to sign the 'reason why' letter, and nine times out of 10 it is because it is the cheapest product."

Fees are usually calculated on an hourly basis and smaller investors may find the total cost works out at more than the commission due on their investment.

"For the mass market, the common currency is commissions and there is nothing wrong with that as long as the commission is disclosed," says Mr Hobbs. Affluent clients with investment assets over €100,000 will prefer to pay fees or a mixture of fees and commission, he says.

According to a report by accounting firm Cooney Carey, life assurance consumers are likely to face price rises under the new regime. But in an unstable market, the price of either the advice or the investment product should not be a deciding factor for consumers, according to Mr Reid from the IBA. "The adviser has to recommend the best policy on balance, not necessarily the cheapest policy."

A greater focus on consumer protection is likely to brought in once the Irish Financial Services Regulatory Authority (IFSRA) is up and running under the chairmanship of Mr Brian Patterson. But whether consumers choose a commission- or fee-based service, a multi-agency intermediary or authorised adviser, they can at least be reassured that standards in the industry have already shot up, according to Mr Hobbs.

Terms of business statements, factfinds and "reason why" letters are "pretty basic stuff", he says, but a revolution for some brokers.