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Categories:Other

Independence should shine through status disclosure

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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 nic@inspiredmoney.co.uk

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Readers' comments (9)

  • Independence loses it meaning and value post RDR. Going forward it will be more akin to visiting a GP (your 'independent' doctor) and being referred on to a specialist surgeon (your 'restricted' doctor). Unfortinately, bundled in with the specialist will be the single product rep... so how does the client tell the difference between a company rep and a top-notch discretionary investment manager? Same label, vastly different gift.

    Then add in the confusion when the client can go to an 'independent' adviser who can't advise them on their stocks and shares but the restricted whole market stockbroker or wealth manager who can. By tying independenace to products rather than service it has been devalued and is oddly ironic given the emphasis on charging fees for service (i.e.advice) rather than selling products.

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  • "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"

    But you have spent a long time telling us how easy it all is nick - what changed your tune?

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  • i'm old enough to have traded through this whole debate the last time. Over the last 30+ years i have promoted independent advice and will continue to so, trade bodies are toothless wonders and often run by those with their own agenda. As IFAs we have fought long and hard to distance ourselves from the "bank" salesperson, let's not give it up without one hell of a fight.

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  • St James Place, who are clearly not independent, assure me that in respect of protection their associates are able to use any provider, thereby signifying 'independence' or 'whole of market; or whatever other epithet you care to use.

    The battle to preserve the 'independent' label was lost when the FSA, at the behest of the OFT, introduced depolarisation.

    That one alteration served to muddy the water significsntly with tied, multi-tied, multi-multi-tied and whole of market all using similar terms to describe their offering.

    The use of the cool phrase 'best of breed' served to imply that a tied agent was actually an independent adviser who had researched the market and decided that only six providers met his rigorous criteria.

    In the industry we know this image prpmotion to be poppycock but the consumer doesn't.

    Whilst depolarisation is allowed to continue the fight for the pre-eminence of independent advice is doomed to failure.

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  • Fraser B

    Sorry my friend but not only has the fight been lost to these idiots who 'run' our industry, but do has the war! RIP Independent Financial Advisers.....

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  • I've never been convinced by the 'I' in IFA, especially as given the market share of the big Providers most 'life & pension' old school model IFAs can be viewed as virtual multi ties anyway.

    What I mean by this, for the hard of thinking on these forums, is that most advisers tend to use the same provider products over and over (they are the most competitive on price and features), and only really use the smaller providers for small amounts of fringe business. Is this really 'independent', or is the independent tag merely a crutch for some advisers to lean on in a 'I'm not really a salesman' kind of way?

    This could be perpetuated by the platform market. If I use Novia and FNW then am I not partially restricting myself to the generic tax wrappers available via the particular platform. Sure, as regards research I will look at the WOM via Synaptics or Aequos but if, after RDR the tax wrappers become generic then they will all be very similar in any case. If I want to build an on platform model which is easily saleable then I would generally use one or two platforms.

    BTW I agree with Fraser, trade bodies are toothless wonders and usually have their own agenda. What we need is for someone in the industry, maybe who is retired and has no commercial axe to grind to set up a proper trade body which could actually make a difference. I'll not hold my breath though waiting for this to happen!

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  • I will carry on telling prospective clients that I offer unbiased, INDEPENDENT advice, irrespective of any rule changes and semantic debtaes by useless regulators and toothless trade bodies.

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  • No doubt those desparate folk at Aifa will open up membership to restricted advisers but, for the life of me, I cannot imagine why a firm of restricted advisers would want to join.

    Aifa has been run for too long by self-serving careerists whose own ambitiions have taken priority over those of their members - hence the fawning cowardice in the face of the regulator. IFAs have achieved more by themselves in recent years than their clueless and feeble trade body. No reason why restricted advisers won't be able to do the same.

    Anyone else noticed that every time Aifa's quoted in the press they are always 'concerned' about whatever the issue is? And that's it. They are 'concerned'. Bunch of impotent incompetents.

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  • Dathan Steele | 15 May 2011 11:12 am

    Setting a trade body that attracts enough support for it to survive was a dream for many of us, the big spanner in the works is IFA apathy, then there is the establishment, the McKinsey people, the politicians who listen to them and the regulators who are far divorced from reality. Finally there is the element in any organization who prime it to self-destruct.

    IFAs? Nobody cares about them, not even IFAs.

    Consumers face four or five shades of grey in financial services, none of them are aimed at holistic advice..

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