What’s in a name? For as long as I have covered the financial services industry as a journalist, one of the proudest boasts of many of its participants has been that they are independent financial advisers as opposed to tied agents or life insurance sales people.
IFAs who have spoken to me over the years have regularly talked of a career progression that started off with working for a life company before moving onwards and upwards to the sunny uplands of genuine independence.
For a long time, IFA status was strongly defended by most advisers, not just in terms of their support for bodies that promoted this ideal to consumers, such as IFA Promotion, but also through trade associations campaigning to retain the term as a distinct advice category, enshrining a powerful ethos of being unbiased and “better” than any alternatives on the market.
Yet in the past two or three years, this determination to keep the initials “IFA” shining brightly appears gradually to have evaporated.
As we move into the final 12 months before the extinction of the current rules on what constitutes an IFA, it is worth reflecting on whether the IFA tag itself is something worth saving or if it should be ditched.
A few months ago, we saw Aifa ditching its requirement that in order to be allowed into its organisation, prospective members need to be independent. Under the
retence of refusing to accept the FSA’s decision to “move the goalposts”, the trade body moved its own so widely that just about anyone can join as long as they know how to spell, if not necessarily pronounce, the word C.O.M.M.I.S.S.I.O.N. From that side, then, independence is definitely dead and buried.
Perhaps more surprising is the attack on the term coming from the opposite direction.
In the last issue of Money Marketing before the new year, my friend and former colleague Robert Reid wrote an interesting piece in which he admitted that his own business, Syndaxi Chartered Financial Planning, has not used the term IFA for some time.
Rob wrote: “As a firm, we dropped the IFA moniker a while ago as it did not align with what we are about, in that we only do what we are competent to do. Before you all rush to blog, think of all the firms near you displaying the Unbiased symbol that offer nowhere near a holistic proposition.
“How happy would you be for potential clients to think of your firm in the same vein? I once said the problem with with-profits was it was a generic term for a non-generic range of products. The term IFA shares the same problem and that is why chartered financial planning firms have the edge.”
In essence, Rob is arguing two distinct – and potentially devastating – points at the same time. One is that many of those who use the term independent do not justify it in terms of their practice, which, deep down, most of us have known for a long time.
The second is that independence of product advice is not all it is cracked up to me. As Rob puts it: “I once said that the perceived advantages of IFAs could come back to haunt them, for example, the ability to research the whole market. This is just not practical every time you take on a new client and yet it is often cited as a core advantage.”
Rob prefers the term “financial planner” with regard to his work and it is perhaps no surprise, given his one-time role at Sofa and past links with the CII, that the use of the word “chartered” also figures in his column. But even if the Sofa/CII link were not there, many other IFAs I respect have also told me in recent years that they too also much prefer to use the term financial planning for what they do rather than independent advice.
If this is true, then it begs two questions. The first is that Gill Cardy’s valiant attempts to create an IFA-only trade body is doomed to failure because no one will care enough about being independent to bother joining an organisation that upholds long since dead values.
The second is that, inadvertently, what the RDR may be on the verge of heralding is the end of an IFA sector that no longer was concerned enough about the distinction between its role and a salesperson’s to stick with independence.
What seems to be happening is that no one cares about a badge they once wore with pride and it could well fall into disuse as a result in the next year or two unless, of course, some readers of this column decide that the consequence of abandoning the term independent financial advice will mean far more confusion for consumers.
If so, there are barely 360 days left to come up with a plan – and the clock is ticking.
Nic Cicutti can be contacted at email@example.com