The earlier voluntary trust proposal in the FSA's CP174 required the "informed consent of the clients", and the new non-statutory trust proposal in "Feedback on CP174 and 'near final' text" allows use for "any consenting client's money".

It is not explicitly stated whether "consent" can simply be imposed on the client by the broker's terms of business, or whether the client is required to give definite consent, whether in writing or by recorded conversation. If the latter, this is clearly completely impractical in a large retail environment, and urgent clarification by the FSA is needed.

This area of handling client money is in our opinion by far the most damaging and unwieldy aspect of otherwise generally sensible and worthwhile proposals. If non-statutory trusts are unworkable, brokers will be forced into statutory trusts.

Then the whole industry will have to gear itself up for much increased account reconciliation and loss of cash-flow to insurers, since every debit may only be paid to the insurer when cleared funds have been received from the client whose debit it is.

Insurers have shot themselves in the foot badly by resisting compulsory risk transfer, and that it is extremely regrettable that the FSA has failed to be convinced of the case. We also regret that the resulting compensation fund relieves insurers' agency and credit control departments of their proper risk.

Unfortunately, it appears that those responsible for running businesses, whether insurers or brokers, have stuck their heads in the sand and left FSA proposals to their compliance departments, who only consider the technical aspects of how to comply, when in fact overall business considerations need to be addressed at the highest level.

The list of non-confidential respondents to CP174 is remarkably short in terms of insurers and brokers. Perhaps, like the electorate, we get what we deserve.

It may now be too late for this matter to be reconsidered, but it's time for everybody to wake up and make representations. The alternative is for the retail broker market to follow the dinosaurs and leave the directs laughing all the way to the bank, ultimately with a much reduced market to the detriment of consumers.

G Foster Taylor
Taylor Price & Co