15th October 2009

Adviser Alliance

Most readers will be aware of recent plans to turn the IFA Defence Union into a more robust organisation. One with a solid infrastructure, full accountability and an increased membership.

For reasons already well documented this transition failed to materialise which was a major disappointment to myself and many supporting advisers.

Following this setback I was urged by a number of senior industry figures to start up a focused, adviser-serving body that would fight against mis-regulation and the pernicious, and seemingly inexorable, removal of advisers legal rights.

Quite a task, but Derek Gair, Steve Farrall and myself concluded that whilst the idea carried merit, unless a certain critical mass could be attained, it might prove unviable.

Two weeks back we undertook an exploratory e-mail shot to advisers asking whether there was an appetite for such an organisation. We were hopeful of a  ‘yes’ response of around 50%. In the event, a surprising 92% of respondents felt that IFAs were not being fully represented and undertook to support a dedicated adviser body. Whilst we knew that there was a large number of advisers who felt disconnected and powerless the level of response was totally unexpected.

This provided a clear mandate for taking the idea forward and I am pleased to announce the formation of Adviser Alliance which is mandated to lobby and inform regulators, MP’s and other relevant individuals or organisations of IFAs views with an aim of bringing about regulatory change and a more balanced advisory world.

We will shortly be launching a website and will be contacting as many firms as possible to provide greater information and invite membership. Interested readers can contact me initially at alan.lakey@btconnect.com.

Last week, at an ILAG meeting, I had the pleasure of engaging in debate with the redoubtable Andrew Fisher from Towry Law. Many of you will know him to be a vociferous advocate of a fee-only approach, even though Towry Law’s charging structure is based on a percentage of funds under management, a calculation not dissimilar to initial and trail commission.

The surprise for me was his somewhat grudging acceptance that there is a place for commission on protection policies. It seems his anti-commission views primarily extend to the ‘bad-adviser’ element that take 7% from lump sum investments and sell discredited with-profits bonds.

This is a major turnaround on his behalf because it was just twelve months back that he wrote to Gordon Brown explaining that the global economic meltdown was entirely due to commission.

Such nonsense makes me reflect on what exactly a fee is. I have always believed that true fee-based business relates either to an agreed hourly rate or to an agreed fee, irrespective of whether funds are invested. If I am correct then Towry Law actually operates a commission-based model rather than a fee-based model, which makes young Andy’s comments quite rich, although not quite as rich as him with his myriad Towry Law share options.

Charging a set up fee which exactly mirrors funds under management is the same as taking initial commission. Charging an annual fee which exactly mirrors the funds value is identical to taking trail commission. One of the reasons that Towry Law seems to be doing so well is that whereas commission-based advisers typically receive between 0.25% and 0.50% p.a. Towry takes 2% p.a. on the first £100k.

So Andy has a very good business model which is profitable and, apparently, expanding. What a shame then that he doesn’t come clean and confess that he actually operates a sophisticated commission-based company rather than try for the moral high ground.

Alan Lakey - Highclere Financial Services