16th August 2011
The Brothers are revolting?
Sadly, despite being invited, I was unable to attend the meeting in question yet I was surprised and to a degree dismayed to see this headline “Industry figures in talks to set up trade body rival” hitting the news pages last week.
Such headlines are really the result of an acute sense of frustration in what many in the adviser community see as the lamentable representation they have had in the face of an ugly and unfair series of battles with regulation over the last few years.
When I started Panacea, some supporting firms thought that we were a “trade union” for IFAs. Nothing could be further from the truth, we are, as most will now know, the only active online community for directly-regulated IFA firms who are looking for access to help, educational support, advice, ideas and technical training from product providers - all in one place and for free!
We achieve a lot with a low level of resource because we recognise that if someone else does something well, work with them and do not try and re-invent the wheel.
So, despite the many criticisms of AIFA’s past failures, it may be better to look at a ‘Mary Portas’makeover rather than to ‘bin it’ and start again.
The problem AIFA has in the eyes of many disaffected IFAs is that it has not appeared to engage with its membership over a number of very important years on issues of vital importance to the membership, the industry and ultimately the consumer.
The past leadership has ploughed an often poorly consulted furrough with little or no understanding of what the root and branch membership either wants or stands for. That is changing I believe but I would suspect not quickly enough for many.
To set up a new trade body is not an easy task and with IFAs having AIFA and Adviser Alliance already available, I do not see that setting up another body solely for “Independent” financial advisers has any merit and it is unlikely to gain sufficient funding support beyond an initial wave of euphoria to achieve any long term credibility.
The adviser community needs to look at what it wants a trade body to do.
Is it to act as a centralisation of views and opinion in order to see fair play by way of concensus in the formation of a regulatory framework and the impact it has on its membership, or is it to see the protection of the word “Independent? After all restricted advice to the masses could turn out to be more acceptable than thought, both to the consumer and advisers alike. If it is to protect the word ‘Independent’ is that not better achieved by way of relationships with IFAP or via the CII in the ‘Professions’ makeover underway with the RDR process?
As restricted and independent advisers are all subject to the same regulatory constraints and controls, and to a great degree share the same ideals (that of ensuring their clients get the best possible service and advice relevant to their aims, aspirations and circumstances) surely strength can found in the broad church model rather than creating a sect like representation that will never get heard with any degree of seriousness.
Linked with this conundrum is the fact that advice can be independent in the restricted model as the restriction is by way of what you want to advise upon by way of qualification. Are those HNW Wealth Architects restricted if they choose not to be involved with the Protection or Mortgage market?
So that brings us to the thorny question of trade body or trade union. The latter in society today does not carry the clout of pre-Thatcher years but unions still have the capacity to bring normal life to a standstill.
Professions do not make easy bedfellows with this ideal and I suspect IFAs would feel uneasy at being represented by a trade union and unwilling to get involved with mass protest.
Despite many IFAs feeling rightly aggrieved with the seemingly undefended imposition of regulatory change, I cannot see that a cry of “Everybody out” will garner too much support from the industry or the public.
The sight of IFAs huddled around braziers in high streets up and down the land would not do the credibility image too much good.
So, where should we go in search for the Grail of strong and united representation? Do Financial Advisers need another Trade body?
Comments (3)
The idea of a trade union is for me anathema. I wouldn’t even join the students union (back in the last century).
Representation going forward is a thorny issue. On the one hand the body needs to be taken seriously by those it seeks to influence. On the other it has to steer a course between unalloyed populism and recognising not only what may be best for members, but what is best for the profession and the consumer. These cannot be viewed as divergent issues.
The other difficulty for someone in my position is the nonsense of the new divisions of ‘advice’. No one will ever persuade me that Independence is not the pinnacle – the Gold Standard and therefore by definition anything which isn’t is somewhat less. But in the new world accommodations may well have to be made and pride swallowed.
Here we have a situation that has not been core to the debate. In my view other issues with which I can agree have been pushed to centre stage, while the issue of status has been clouded by those with vested interests.
That the proposals are a mess I believe should not be in dispute.
From the Regulators statements:
• If you declare yourself to be an independent adviser you will need to consider a broader range of products (beyond packaged products);
Then you move on to definitions
A ‘retail investment product’ is
(a) A life policy; or
(b) A unit; or
(c) A stakeholder pension scheme; or
(d) A personal pension scheme; or
(e) An interest in an investment trust savings scheme; or
(f) A security in an investment trust; or
(g) any other designated investment which offers exposure to underlying financial assets, in a packaged form which modifies that exposure when compared with a direct holding in the financial asset; or
(h) A structured capital-at-risk product;
Whether or not any of (a) to (h) are held within an ISA or a CTF.
So please tell me which of these is NOT a packaged product. An Investment Trust, an ETF and a Structured Product are all packaged. As ever the Regulator is being a whole lot less than clear (and brief!)
We can advise on individual shares, but we can’t deal in them – unless we use a wrap and then it rather defeats the object, as costs are added. In any case we are not stockbrokers and although we may offer a view we are not in a position to monitor and trade on a daily basis – as is often required of direct equity investments. Yes we can give some tax advice, but that doesn’t make us accountants. (It’s bizarre that a stockbroker will now be considered restricted. What do people expect – when you go to the dentist you don’t expect to have your piles treated!)
Yes many of us advise on bank accounts – and if this is what they mean – why don’t they just say so?
So what else is there that isn’t packaged – fine wine? (You bet!) Gold bars, direct property (we do give advice on this – mainly via mortgages!), vintage cars (yes please!), stamps? Instead of talking about ‘non packaged products’ – please spell it out.
As I have so often repeated this whole issue is surrounded by vested interests who want to make it as scary and complicated as possible so as to persuade IFAs to become restricted. I admit that restricted will suit the larger organisations. However when at FSA seminars it has been made abundantly clear that although we should be aware of ‘the wider view’ we are not necessarily expected to recommend, nor are we expected to include everything we will not recommend into the report (obviously!).
When I asked the question: “Well how will you establish whether all things have been considered” the answer was illuminating – they don’t really know! Basically we are expected to keep details in our files to show that we have knowledge and my guess is that the Regulator will expect to see a greater use of Investment Trusts and external cash accounts. As to ETFs and Structured products – they themselves are not at ease with these and I have folders full of antipathetic comments from the Regulator, consumer bodies and analysts.
In the end this whole issue is somewhat of a farce and in my view, once things settle down after RDR, we will find that all this is not as nearly as bad or difficult as it has been painted and my guess is that many of those who have been driven to become restricted will perhaps have a change of mind (mainly the smaller firms).
Finally what is not made at all clear by anyone is how will this work in practice? Do we have to make a submission to the Regulator telling them of our intended status after 31/12/12? What evidence will we have to submit to support? How will the regulator check?
Indeed as I have whined so often in the past - how will the Regulator police the divisions? How will they know that a restricted adviser is disclosing as he should? That an independent is truly independent? I just don’t see how they can enforce all this in an effective way.
These are the issues which in my view need to be explained in plain detail and debated. Our community has been behaving like Canute with the issues of Education and Commission, which are very hard to argue against.
As has been eruditely expressed elsewhere we need to be seen to be on the side of the consumer – and what better way than to point out that the consumer is likely to be bamboozled and confused by the new artificial divisions.
Harry Katz
Norwest 16/08/2011 10:08
http://www.youtube.com/watch?v=iS-0Az7dgRY
Probably the most undervalued aspect of AIFA is its technical capability headed up by Andrew Strange. Backroom boys are always under-appreciated by those who unknowingly benefit from the fruits of their labours. Ironically it’s the technical team that AIFA’s seemingly ever-growing army of detractors and would-be competitors would most struggle to emulate.
Anyone can knock out press releases, blog and run petitions, I know because I’ve done it. However in-depth research and the subsequent formulation of coherent policy positions is the most painstaking and valuable - albeit unglamorous – part of what any serious ‘influence’ organisation does.
A couple of years back I launched IFAPAC – the IFA Political Action Committee. I aimed to get more IFAs to talk direct to MPs. We were surprisingly successful but I never kidded myself – and I never kidded anyone else – that IFAPAC could compete with AIFA. It was always designed to be complementary to AIFA and I said so at the time, though at the time I didn’t have a great deal of faith in the then-leadership of AIFA. I along with many more felt it had soft-pedalled on the RDR.
Subsequently AIFA’s position visibly hardened - in response, I believe, to the views I and others articulated - and I felt comfortable standing for its Board to which I was elected last November. Having seen AIFA from the inside I am completely comfortable now with the decision I made then, and I am more than ever convinced that anyone trying to divide our forces is doing the adviser community no favours.
That’s why I think Garry Heath and anyone else looking at launching yet another IFA lobby group should first take the trouble to find out what AIFA actually does and appreciate just how much effort and work is put in by the paid people and the volunteer unpaid Council members. IFAs need to get their heads around the fact that they either get behind the organisation that’s doing it right or they chuck their money – and sooner or later their livelihoods – down the drain with wannabes who have no realistic chance of delivering in the long run.
Garry, stop kidding yourself, but more importantly stop kidding the IFA community. Now’s the time to consolidate, not divide.
Neil F. Liversidge 18/08/2011 13:33
AIFA has failed to listen to its smaller directly regulated members since Paul Smee left; unfortunately the result is what you now see.
Gary was correct many years ago but not enough IFA's supported him, the result is the destruction of our profession by a quango, who openly admit they are not accountable to anyone.
RDR will eventually be seen as a final attempt to destroy the IFA, in favour of banks and direct sales who have proven themselves incapable of TCF.
IFA's didn’t need to be bailed out in 2008 did they?
I say to the FSA, stop trying to micro manage our businesses regulate sensibly.
AIFA you are the Association of INDEPENDANT financial advisors, either drop the title or listen to the IFA's who supported you for the last decade and beyond.
To the professional bodies, educate and support us, but stop lining your own pockets, unfortunately you seem to have forgotten you are there for the membership, the membership is not there to build Ivory towers for the senior management.
We do not live in a communist society, give the IFA his human rights back and access to common law, then they can get on and look after their clients instead of putting up with all this crap!
Rod Leonard 19/08/2011 10:14
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