Nic Cicutti: The root of IFA prejudice
Last week’s open letter from Money Marketing editor Paul McMillan to Paul Lewis, responding to a passionate exchange of views between the latter and recent Aifa council recruit Neil Liversidge, capped a fantastic correspondence between all three parties.
What was so good was not only Neil’s anger at the way he felt his industry is being demonised in the media, but - I would say this wouldn’t I - the way Paul Lewis was not only willing to engage with him but also in the process factually skewered many of Neil’s comments.
For example, on the issue of Northern Rock, where Neil claimed Money Box had not tried to tell people that the bank’s effective nationalisation made it a haven for savers’ cash, Paul proved the opposite was true.
Paul Lewis also pointed out that the “debate” demanded by Neil over Ivan Massow’s new trail commission-rebating service had, in fact, already taken place on Money Box the previous week, with Brian Dennehy there to represent IFAs. Neil probably felt he should have been there instead.
All in all, I really enjoyed the debate between Neil and Paul. What made it even more interesting was McMillan’s own open letter. In many ways, this last acted as the prequel to the main act, explaining why it is that so many IFAs feel angry about the way their industry is constantly under attack.
Where I felt McMillan was a little weak was in his attempted demolition of the claim made by Lewis to the effect that trail, commission was “one of the industry’s best-kept secrets”. By attempting to dispute the findings of the Consumer Focus report in which it is claimed that 46 per cent of consumers are not aware whether their advisers receive trail commission, McMillan is on shaky ground.
The reality is that most of us know deep down that consumers do not know how much of their investments are paid out in trail. I still remember being amazed at discovering my IFA was getting a few pence a month from an old endowment policy I had taken out many years before. Of course, I had signed a plethora of forms to various providers to the effect that trail could be paid to the IFA firm in question and my adviser was very diligent, but a Scottish Amicable policy taken out in 1983? Blimey.
What really struck me about the entire three-way debate, however, was not just the quality of the points made and the replies to them. It was the underlying fact that, as McMillan pointed out, again and again a series of attacks are made on the industry on the flimsiest of grounds.
Money Marketing has been exceptional in unearthing some of the counter-arguments to some of the so-called “research” from Consumer Focus - the freedom of information email exchange between Consumer Focus and the FSA was a fantastic journalistic exercise.
But the question remains - why is it so many journalists are ready to print poor-quality research from organisations such as Consumer Focus? Some of it is to do with time, you are being asked to contribute copy on a story and it is the easiest thing in the world to just work with what you have rather than do some in-depth digging.
Another part of it is to do with mindset. If you are in a newsroom, you know that every other paper is likely to go with the easy story, the one in which the industry is slammed in an official report. Your news editor is expecting more or less the same from you, so why go off at a tangent and come up with something with a variety of nuances that are far harder to explain?
Let’s not forget either that all newspapers cater to their readers’ deeply-held prejudices - and if the prejudice is one where the adviser is a foot-in-the-door salesman, why would you want to go against the grain?
But that also begs a question, which I fear neither Neil Liversidge nor McMillan, in their excellent columns, quite get to grips with - prejudices never come out of nowhere.
It may be a twisted reality but at least some of it holds true or is deemed to be true in the mind of the person who believes it.
Preconceptions against bankers, insurers, advisers and the industry as a whole reflect real-life experiences of many millions of people.
IFAs as an organised group should be at the forefront of demands for change in that relationship. Unless they are, debates like this will always remain the exception, barely affecting far wider - if not entirely accurate - discussions in the national media, where IFAs are seen as commission-grabbing con merchants.
Nic Cicutti can be contacted at email@example.com