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Categories:Advisers,Regulation

Garry Heath: Aifa is trapped and must be reformed

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The news that Aifa’s Stephen Gay is moving to the ABI puts the IFA sector in an appalling position.

The retail distribution review is arriving in December and academic standards, restricted advice, legacy commissions and simplified advice all remain unclear. RDR is a demonstrable basket case and yet Aifa maintains a doleful silence which has been criticised by the Treasury select committee.

The FCA gives the sector “a once in a decade” opportunity to rein in the costs and scope of regulation, sort out the compensation scheme, get a long stop and demand proper parliamentary oversight. Again Aifa flaps around the outside of the issue and the FCA will become a rebranded FSA – only more expensive.

There is an historical context. The IFA Association was Aifa’s predecessor. It had grown from local grass root groups of IFAs into a national organisation. It was determined to represent its members and ensure their voice and the voices of their clients were heard. As a result, IFAA was far more likely to side with the Consumers Association than the ABI.

IFAA also knew it didn’t have the establishment levers to win in the smoke filled rooms. Its members couldn’t threaten to relocate abroad, we did not have the establishment contacts and neither could IFAs offer well paid jobs to regulators, civil servants or ex-ministers.

We had one great asset, a membership used to talking for a living, so we were able to use them to influence MPs. This use of the democratic process really annoyed civil servants as they could not control it. We objected to the excesses of the pensions review taking SIB to a judicial review which tied their hands.

In canine terms: whilst the BBA was a Great Dane and the ABI was a slightly dozy Labrador - the IFAA was forced to be a Jack Russell – bouncy, rather noisy and likely to administer a nasty bite if ignored. As its Director General; I was often pictured as this “larger than life” ninja creature.  Useful at first; this caricature became a burden. The reality was far less newsworthy and far more practical.

We were totally supportive of the reformed FIMBRA. We blew the whistle of dishonest IFAs. We worked together with the Consumer Association on disclosure. We developed a huge number of contacts in the media and in Parliament and that gave is another form of influence. As a result polarisation was untouchable, commission was disclosed but available and the sector’s market share improved by over 15 per cent.

Our approach was transparent and democratic. If the Treasury, banks or the providers wanted to do a back door deal they knew that IFAA would blow the whistle. We kept the process honest and the powerful on the back foot. This was beneficial to consumers and advisers alike. We also had a clear view of how we wanted the sector to develop.

IFAA was too democratic for New Labour and they joined forces with the ABI to attack us. Their new association; Aifa would play the establishment game, never ever confronting the powerful and drawing its primary funds from the ABI & networks. From the outset it was heavily funded by the ABI who paid over £300,000 for its creation.  It hoped this pacifist approach would give results.

In a stroke Aifa was trapped in the system. It had thrown away all its bargaining tools, any chance of surprise and over time its income.

So where are we now? 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. Small IFAs look upon it as a joke. It is dominated by networks, most whom are owned by ABI members and have a different agenda to smaller IFAs.

The Aifa income figures also tell the story. ABI “associate members” represent in excess of 20 per cent, Networks, wholly or partially owned by providers, represent another 57 per cent. This leaves around 20 per cent funded by smaller IFAs.

By rights it should be completely reformed; but those IFAs who would create the pressure for this have left Aifa. Neil Liversedge, in a statement of the obvious, said that Aifa’s detractors were not in membership. Wonder why eh Neil?

A new association is unlikely as RDR will kill off between 20 – 40 per cent of IFAs who might have funded it. The Aifa board may appoint a real leader and IFAs could pile into Aifa membership in the hope of reforming it or the ABI could make it a subsidiary which would reflect the reality.

Garry Heath is former director general of the IFA Association

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Readers' comments (7)

  • AIFA's finished...............

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  • Totally agree with Gary, as usual!

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  • Gazza - our new Leader - take us to the promised land please!!

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  • http://www.moneymarketing.co.uk/news/advisers-angry-after-aifa-rules-out-ifa-applicants-for-top-job/96705.article

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  • Sometimes when an animal is too badly injured the more humane course of action is to have it put down.
    Can anyone present a cogent and comprehensive argument for the retention of AIFA based on successful act to date?

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  • If IFAs really want AIFA to be effective the answer is simple: join it, pay for it, and agitate within it to get what you want. Unfortunately most would rather keep their wallets in their pockets, hide behind excuses about AIFA's supposed deficiencies, and contribute nothing positive. Alan Lakey and Gill Cardy will find the same. If all DA firms joined AIFA, and if all network members demanded the right to join individually, to pay their own way and elect their own representatives, AIFA would undeniably be more democratic and more representative of actual advisers. However, it is clear that most prefer to have somebody else pick up the tab. The lesson therefore is that IFAs get the representation they deserve and will continue so to do, just as in life outside the IFA community we get the governments and local councils we also deserve. To recall a quote from my schoolday studies of Julius Caesar: "The fault, dear Brutus, is not in our stars but in ourselves."

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  • I find Aifa's blaming ex and non-members for its current predicament as ridiculous as the boss of Tesco blaming its recent disappointing performance on those shoppers who, instead of 'putting their hands in their pockets' at Tesco, instead chose to shop at Sainsbury's or Waitrose. Laughable.

    Readers of blogs such as these are only too aware that people have joined Aifa, have agitated for change and have ended up resigning due to the feeling that they are banging their heads against a brick wall.

    Glen McKeown is absolutely right; it is time for Aifa to leave the stage so that a fresh body with a new and energetic mandate - one that refuses to approach FSA as a supplicant - can take up the baton.

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