1 Mar 2019
Are trade associations becoming irrelevant?
Generally, I avoid reading Nic Cicutti’s contributions in Money Marketing. I have low blood pressure and I like to keep it that way. But last week, he embarked on a personal attack on myself and Libertatem so I thought it prudent to respond.
Firstly, I would like to supply some background on my relationship with Mr Cicutti.
Nic and I go back a long way. Although we haven’t met in years, we have had many a beer in the past and he was certainly a supporter of my efforts back in the early days of the IFA Association. Indeed, he even contributed articles to a magazine produced by the Association until the decision was taken by the editorial team to drop him, primarily because they regarded his articles as ‘boring and out of touch with the aims and objectives of the Association’.
It was a decision that came back to haunt me personally when I launched Libertatem. Nic immediately dismissed my efforts as being that of a ‘tribute band, attempting to bring back the past’. He has been on my case pretty much ever since.
I have nothing against him personally, although I should state for the record that I dislike everything he represents. He has the same mind set as most Metropolitan progressives. He does not believe that any commercial activity can be moral or trusted and must be conducted under the watchful eye of a huge phalanx of regulators. In this he reflects the views of our political and regulatory elite in general, and the FOS in particular.
Putting my personal feelings (and his personal comments) to one side, Nic does raise an important point: Are trade associations still relevant and does the sector actually want them?
In the UK, 80% of firms don’t contribute to a trade association, never have and never will. They have a number of reasons not to join and obviously feel that we serve no useful purpose.
Naturally, we beg to differ. Recent months have seen us co-ordinating the activity around the Connaught Fund, which is the best example yet of regulatory inaction and an ombudsman determined to dump responsibility on advisers rather than those responsible for running the fund.
Our efforts have already seen Capita return 100% of the capital invested in the fund to investors which has saved each and every adviser £4,500 simply because it hasn’t been taken out of the bottomless pot that is the FSCS. We are now concentrating on trying to return those advisers affected to their original position as well.
Meanwhile, in our FAMR discussions with the FCA, Libertatem focused on regulatory and FSCS costs. The UK Professional Advice sector represents only 1.1 in 1,000 of FOS’s cases and yet each of those cases shares over £76,000 of regulatory fees. A huge cost for a very small problem. Advisers are also exposed to a potential £400m each year from their share of their two FSCS pots.
As a result of lobbying by both Libertatem and PIMFA, 25% of that cost will now be found by the providers. A potential saving of £100m per annum – or £3,125 per adviser.
And then there is The Heath Report 3 (THR3). Nic describes it as ‘a report that nobody cares about’. And yet the industry response to it has been very positive, the underlying trends have been picked up on and a number of industry leaders have requested meetings to discuss further. Put simply, Nic is wrong.
Libertatem and PIMFA exist to make the world a better place for those they represent. Without us, the regulators can do what they want, which often appears to be fast tracking the demise of the impartial advice sector.
Nic closed his article by asserting that PIMFA is doomed to become as irrelevant tomorrow as I am today. He may well be right. With 80 per cent of the adviser community happy to freeload on Libertatem’s and PIMFA’s membership, it will always be an uphill struggle. We estimate that £3m is required per annum to cover all bases. At present, we believe that between us, we are raising less than a third of that figure through membership and sponsorship. With PIMFA’s loyalties split between advisers and wealth managers, even less of that pot is going towards fighting the IFA’s corner.
So should we just pack up our files and go home? At my age, and having done it all before, it certainly makes sense. But with a vibrant and passionate membership behind me, and no successor in the wings to carry on the work, it’s simply not an option.
I would suggest that perhaps it is Nic Cicutti that needs a cause to believe in and fight for. As a journalist, why not delve deeper into the underlying problems of the regulatory system, the sector and the trade associations? Take a closer look at the revolving door between the regulator and the Treasury. And question the wage structure at the FCA in the same way the national media called the BBC to account.
Because if Nic is right, and the industry has indeed passed us all by, then we will end up with no impartial advice sector to represent – and he may well find himself with nothing left to report on.
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