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Categories:Other,Regulation

Cicutti: Falling in love with IFAs again

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Are IFAs better or less well respected today than they were 10 or 20 years ago? I found myself asking that question after reading Garry Heath’s fascinating article in which he tore strips off Aifa for flapping around on regulatory issues instead of representing its members.

For Garry, “Aifa has no agenda for the sector and no way of promoting one if it had. It sees its task as mitigating disasters at the margin - not fighting for IFAs and their clients.”

Aifa, he claims, was set up as a creature of the Association of British Insurers and deliberately used to chart a less confrontational approach to trade body representation of IFAs, in place of the one previously adopted by Garry and his associates at the IFA Association.

But while acknowledging the hurt and sense of betrayal that Garry feels over events that took place 12 years ago, we also need to be slightly more candid about both the successes and failures of Aifa’s earlier incarnation.

For without that self-awareness, it will be difficult for Aifa or any of its putative successors to successfully represent the IFA community in the decades ahead.

Which brings me back to my original question. Here, my own answer, a personal one, is that IFAs are less well respected than they were. I recall back in the early and mid-1990s how all my colleagues would automatically defer to the notion that independent advisers were qualitatively different in every respect to insurance company or bank salespeople.

Today, it is as if the issue is less important somehow, as if IFAs have somehow been subsumed back into the financial services swamp.

And here’s the rub - while Garry may proclaim the work of the IFAA as being more muscular and successful in terms of representing the IFA community, it also marked the beginning of the end of many of my colleagues’ potential love affair with the independent sector.

Let me go back to the key issue, the one that Garry still hails as a triumph for IFAA - its long-running legal battle against the regulators back then, including SIB and the Personal Investment Authority, over whether IFAs should send out letters to their clients inviting them to take part in the pension misselling review.

Many of you will remember the issues involved - arguing that professional indemnity insurers were threatening to invalidate the PI cover of IFAs who did send out these letters, Garry Heath and the IFA Association went to court to stop it happening.

IFAA won a partial victory and thousands of advisers used this argument against the regulators for 18 months or more, delaying the review of their personal pension clients.

The problem was that it was an expensive victory, in more ways than one. It cost the IFA Association at least £300,000, plus a large slice of the PIA’s own legal bill. Not that this mattered much to Garry, seeing how his battle was backed financially by many insurers - ironic really, given his apparent abhorrence at the way they now fund Aifa.

More significantly, it also involved a fundamental misreading of the pension misselling review itself, not just by Garry but by the whole industry, which managed to score own goal after own goal on the issue.

For example, how could any sane person have considered it good PR for insurers to challenge the right of trade unions, including the Royal College of Nursing, to take legal action on behalf of their members over this issue? Yet I remember the Pru, among a raft of companies, arguing in court that representing nurses who had been missold a personal pension was an “improper activity” for the RCN to engage in.

Meanwhile, tens of thousands of victims of misselling were dying with significantly smaller pensions than the ones they had been transferred out of.

Some people understood the dangers of this approach. I recall Gareth Marr, still a long-standing adviser, saying: “If we are seen by the public as standing in the way of giving people the compensation they are entitled to, then it will lead to a massive loss of confidence in our sector.” His view was a minority one, sadly.

Year after year of delay, in which insurers, IFAs and regulators were widely seen as failing to clean up their act, led to a far more aggressive approach towards the industry by the Labour Government in 1997 and later years.

More significantly, it also meant the clock started ticking for the kind of legalistic obstructionism Garry and the IFAA were once so keen on - hence the creation of Aifa that same year.

Reviving the IFA sector will require a strong trade association but - and here I differ with Garry - the IFAA is no longer the right template. A new, visibly pro-consumer approach is needed to make us fall in love with IFAs all over again.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Readers' comments (18)

  • Wasn't that a legitimate defence Nic? If you crash your petrol scooter into a mobility scooter you should not admit liability or invite a claim because your cover will be declined, read your policy.

    "IFAA won a partial victory and thousands of advisers used this argument against the regulators for 18 months or more, delaying the review of their personal pension clients."

    Sounds much better than what the banks did with PPI, and still are! We need a Cicutti rant about that in order to bring balance to the debate, or is that impossible?

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  • Not to worry Nic. IFAs' will cease to exist in any significant number over the next ten years. Who will you turn on then?

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  • Nic
    It is very difficult to agree with this statement that you seem to agree with “If we are seen by the public as standing in the way of giving people the compensation they are entitled to, then it will lead to a massive loss of confidence in our sector.”
    What exactly are they entitled too and from whom and why?
    Look carefully at the background of many IFAs, where they came from, and you will see they have been selling legitimate products for a long time, that suddenly become wrong, and the after a time become right again!!
    It would not be a wise thing to back such a ridiculous scenario!
    And yet this is exactly what has happened.
    No wonder people and organizations have fallen out of love with their IFA.
    Look carefully at where a very large number of the product sales came from and you will see they have been from the tied sector where ,heavens forbid, the salesperson is less tan trustworthy!!
    I have seen many failed life Inspectors,protected by their Product provider employers when they gave poor advice,turn to become an IFA,and likewise many 'tied sales people 'have done the same-jumped ship to the safety of the IFA (out of the frying pan into the fire)
    Qualifications mean little or nothing when the person is a trusted adviser,and similarly when the sales persons background has been to progress 'through the ranks' does it mean they are any better than before?
    I think not.

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  • Maybe the reason that IFAs do not seem to emerge out of the FS 'swamp' is because that is what the regulator has created with constant and expensive tinkering that, as you say, has done nothing to help the consumer. Ten years ago you dealt with an insurance company representative or with an independent adviser. It was quite simple and easy to understand for all concerned, most importantly the consumer. Now we have a god awful mess, which is getting messier at great expense, that even those within the industry are having difficulty getting their heads around. So where does that leave the consumer? Unsure, unclear and confused; of course it leads to mistrust!

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  • With the compensation culture backed by greedy lawyers, a regulator that constantly moves the goal posts and a FSCS and FOS that needs to encourage claims to 'stay in business', is it any wonder that confidence in IFAS may have fallen ?

    That said, most clients who have come to know an IFA usually only have positive things to say. It is the press and people who have no experience of using an IFA who hold the negative (and often unfounded) view.

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  • The Pension Reviews marked the lowest ebb in this industry.

    No, I am not talking about mis-selling I am talking about the venal imposition of mass mailing to clients inviting them to have their plan reviewed.

    The invite letter had to include a pre-paid envelope, a form for them to complete and a glossy brochure (R U Owed style). The postage and envelope came to £1 each in todays money.

    The 1990 advice was then studied using 2000 hindsight and the timing was catastrophic because the stockmarket fell like a stone between 2000-2003 which virtually guaranteed a loss when the benefits were calculated and compared.

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  • Whatever is said you always felt that Garry Heath via IFAA tried very hard to support and elevate the services of IFA's. There were (and are) some very big players happy to see the demise of IFA's so Garry had to be combatitive and he led from the front. I had cause to meet him and admired his qualities. Of course things have changed in the market since but essentially the client still requires quality 'face to face' regulated advice and I would suggest with some prospect of continuity. I am less convinced of whether 'independent' means much now.

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  • Meanwhile, tens of thousands of victims of mis-selling were dying with significantly smaller pensions than the ones they had been transferred out of.
    Really?
    Final salary schemes raided by employers with no action taken by the Government.
    Pension scheme valuations signed off but subsequently found to be grossly underestimated.
    AVC's into the main scheme calculated in final benefits(I always recommended FSAVCs where the main scheme did not give the guarantees of non inclusion-was this wrong?)
    Changes to pension age which meant ERO's had a larger penalty.
    Change of the main scheme from FS to MP or similar-again the FSAVC is a winner but was deemed to be a mis-salel!! Irony or what?
    Come on get your facts right!!

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  • OK Nick give up your human and common law rights, have no right off appeal against someone taking you to your regulator and allow them to ignore the 15 year long stop, proove you are innocent and even then have your evidence compleatly ignored and have no organisation to join, that speaks on your behalf.
    I have said it before and will say it again the FSA is out to get rid of the IFA and leave the banks to get bigger on tax payers money buy up the Insurance companies and take over Retail Distribution for themselves.

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  • Nic, you are the Banks court jester. Please Moneymarkleting can we have someone who is impartial please?

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