Independence should shine through status disclosure
I did not discuss it at the time, largely because the debate was subsequently derailed by the discussion about what constitutes free advice, but one of the things I have been meaning to write about for a long time is the issue of status disclosure.
It is a hoary old subject that was recently given fresh legs - if only indirectly - by the interview in Money Marketing between Aifa chairman Lord Deben and the trade body’s director general Stephen Gay.
In that interview, both men expressed their view on the Government’s recently renamed Money Advice Service, which they felt blurred the distinction between financial advice as most IFAs understand it and the service the new body aims to provide.
Gay was widely reported as saying the name change concerns him. “What the service is trying to achieve is all well and good but it is called money advice, not financial advice. What is the difference between money advice and financial advice? The customer is entitled to ask, ’Are you advising me or not?’”
A fair point but it is worth remembering how vital the question of exactly what constitutes an adviser and what he or she ought to be allowed to put on their business cards was to many IFAs some 15 or 20 years ago.
Back then, in a polarised financial advice environment, most IFAs saw the issue both as one of defending their profession against encroachments from salespeople and also educating consumers as to the distinction between the service they provide compared with purveyors of a single company’s products.
When the FSA was moving to scrap polarisation in 2000-1, it commissioned an independent report to specifically look at the use of distinctive titles and logos to distinguish between different distribution channels.
The report eventually came to nothing, as so many FSA documents are prone to, but what it signalled was just how significant the matter was to advisers back then.
Today, the debate appears to have faded away. Indeed, had it not been for the small flurry of interest generated by Gay and Deben’s comments in the trade press last month, one might have assumed the subject was no longer of importance.
To my mind, it is - both for consumers and financial advisers. From a consumer perspective, if I am looking for genuine independent financial advice, I want to know as quickly as possible what I am likely to get. A nicely designed Government or regulatory logo that informs me of my adviser’s precise status is part of that.
From an IFA’s standpoint, the issue is one of how to project the very specific service I provide in what is a crowded and confusing market. Moreover, if I have come through the hell of obtaining additional qualifications and of preparing my business for the fee-charging world after the retail distribution review, I want consumers to know I am at the pinnacle of the financial advice community.
That said, does the Government’s use of the term advice as part of its Money Advice Service really matter? Where Aifa is undoubtedly right is in pointing out the blurring of any distinction between what a genuine financial adviser provides and what MAS offers consumers.
The jury is out and early mystery shopping exercises on the MAS suggest the advice is highly generic and more likely to direct telephone callers towards obtaining further financial advice than the other way round.
My fellow Money Marketing columnist Kim North, who wrote on the subject a few weeks back, is also correct to point to grave concerns at the possibility that MAS advisers will be able to enter work-places and give supposedly unbiased financial guidance to millions of employees. Many of them will be multi-tied or restricted advisers fishing for business and using a Government-backed scheme to do so.
But where does all this leave Aifa? If by raising the MAS issue, Gay and Deben were belatedly trying to resurrect the far broader topic of status disclosure between genuine independent financial advice and other salespeople, their initiative is welcome.
Equally, it has to be said that such a move comes late in the day. Unlike a decade or two ago, there does not appear to have been great impetus on the part of any IFA body to make this a crucial topic for consideration by the FSA during its RDR consultations in recent years.
That is why my gut feeling is that Aifa’s reference to MAS was a one-off. After all, if you are considering widening the trade body’s net to catch restricted advisers after 2012, why get bogged down in potentially divisive issues such as status disclosure?
All of which is a terrible shame. Genuine independent financial advice is priceless. Those who deliver this service deserve to have the fact shouted from the rooftops - and that the trade body appears unable to defend their status as clearly as they merit is a crying shame.
Nic Cicutti can be contacted at firstname.lastname@example.org