News & Views

It's time to spread our wings and fly

Regulatory update for Financial Advisers and Paraplanners

9 Oct 2019

It's time to spread our wings and fly

Libertatem had just completed its third successive year of growth. Each year, more members and more income enable us to achieve more. But it's still disappointing when you compare it to our original survey which lead to our formation back in 2015, and the profession's need for a progressive and proactive trade association.

When we surveyed the IFA sector in 2015, 90% of advisers said they wanted a new trade association. Had even half of those joined, advisers would now be protected by a well supported and well funded body. Unfortunately, they didn’t.

As a trade association, we have a single aim. To maintain and improve the commercial viability of our member firms and the sector they trade in. 

To deliver this aim we have to have the staff and resources. That means an annual budget of over £1m. 

Our aim separates us from other professional bodies like the PFS and CISI. We are not interested in the details of examinations and qualifications - that is their job. Likewise, they have a public interest role which precludes them doing much of the commercial and lobbying role we have to do. But we are a complementary organisation. 

These are two clearly differing roles which cannot be combined unless you have a nationalised profession like medicine within the NHS.

Our efforts should be concentrated into three streams.

Primarily, we need to concentrate on the effect of regulation on the financial viability of member firms. There is a point, fast approaching, where the costs of regulation (not just the direct charges, but also on the onerous deadweight costs and burden) will compromise the whole concept of independent financial advice.  

These costs are now estimated to be circa 20% of advice costs and will continue to grow. Then we must add in the fundings of the FOS and the FSCS. It is these organisations that take out good firms as well as poor ones. And don’t kid yourself that only poor firms are hit. Every day good firms are coming into the sights of these two bodies with little or no heed to common sense or civil law.

Secondly, we should also be able to present our own policies on the development of our sector (or profession if you prefer). 

Our main tool to date has been the Heath Report 3 which set out how to achieve this and was very well received by the sector and government/regulatory bodies as it presented solutions as well as highlighting the problems. 

Policy should not just come from the regulator – in fact the regulator is the worst source of policy initiatives as they tend to create initiatives which ultimately serve to promote their own empire. The best policy is developed by practitioners, their trade associations and their clients working together.  After all, these are the voices that truly matter. And who will protect the consumer from government and bureaucratic failure? 

Finally, we should be able to offer firms help on their individual cases. This is not as important as it used to be thanks to compliance houses such as 360. We do not have the funds to do all these to the max so we have to pick our battles carefully to get the most bang for our buck. 

So, what are the hurdles stopping the necessary take up of membership? 

The biggest is – and always has been – apathy. Even, in the 1990s, when advisers had a single fully stocked trade association with a commercial wing that returned to them 4 times more than their subs, only 30% of adviser firms bothered to join. Currently that number is down to 10%. Advisers are very good at prevarication and apathy. And it is difficult to protect advisers when they don't see the need to protect themselves. 

Neither is the issue financial. To get to base camp we need to raise £1m from an adviser community that has a turnover of £7bn pa. Presuming a 100% take up that’s £1.43 on every £10,000 of fee income. Or about £71.50 on a £500,000 annual revenue business.  So it is not a case of advisers being unable to afford it. It’s not money. It’s will.

But if it's not apathy that is holding you back, is it fear? We do not underestimate how fearful much of the Financial Services Industry can be of the regulator. The recent Berkeley Burke Appeal failed to happen because UK Platform firms and SIPP firms could not raise £300,000 between them. Just one platform declared a profit £40m last year and combined the 2 sectors have £700bn FUA.  Without doubt, it was an opportunity wasted and one that will inevitably come back to bite us, if only because the powers that be know – we, as a profession, will not fight back. 

In failing to fund the defence of Berkeley Burke, these firms have failed to protect themselves from the excesses of FOS and exposed themselves and us to wider excesses. Bullies do not go away. "If once you have paid him the Danegeld, you never get rid of the Dane".

But it is too simple to blame the firms. The two pseudo associations involved in the Berkeley Burke case totally failed to demonstrate any leadership. The prime benefit of trade associations - in a regulated world - is that their staff are not regulated and therefore cannot be 'got at'.  We can attack them, but they cannot attack us. 

Currently too many organisations claiming to represent Financial Service firms are run by the gutless, some of whom are no doubt looking for a better establishment job up the line. They may push the paper and attend the committee meetings, but they do not do the job that is required of them.

So, for the last thirty years, we as a profession have had no push back, no clearly defined plan, and no perception of surrendering principles.  So, it’s no wonder that regulatory costs gave gone up 10-times since 1999. 

Libertatem has the leadership, the arguments, the philosophy and the determination to succeed.  Alas, it does not currently have the funds to proceed.

In the end, Libertatem can only try to persuade adviser firms to join. Unlike the FCA we cannot forced to you join and pay.  All we can do is encourage you to do so, to fund our activities for the greater good and to inject some backbone into the process. We can also provide leadership and a plan of action.

But is there anything else we can do to encourage progress? 

One thing we can do is change our name. In spite of our best attempts to come up with something different, it has been seen as a barrier to joining, been ridiculed by industry commentators and is still regularly mispronounced. Virgin may have worked for Richard Branson.  Libertatem has not worked for us. 

In our promotional material the name Libertatem is accompanied by a strap line – The Impartial Financial Advisers Association. We feel it is time to drop our Latin handle and just become the Impartial Financial Advisers Association.  The IFAA… it seems to have a familiar ring to it. 

Next, we need to sort our back office. We started with a loan of £10k. We could only afford a basic Office 365 but as we have grown, we have outgrown spreadsheets and chunky connections.

Our continued growth has enabled us to recruit the super-efficient Wioletta who has sorted our membership records and is preparing us for investing in a system which will allow us to speed up our blog activity and our membership work.  For the first time we will be able to offer DDMs and also have our own member only chat area. All that should be up and running before Christmas.

We are investing what we can in marketing.  We need to do more ‘meet the advisers’ meetings.  We need to push local representation. And we need, above all, to increase our political lobbying.

But all this needs money.  And in the end, we can only ask. Will you join us?  Can you help fund us?  Will you donate to our cause?  After three years, it is about time that more firms answered yes.

Libertatem

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