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Nic Cicutti: The root of IFA prejudice

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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

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Readers' comments (24)

  • Preconceptions against bankers, insurers, advisers and the industry as a whole reflect real-life experiences of many millions of people.
    Why did you omit phone hacking journalists, who will print anything true or false, for cash, Nic?

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  • The fundamental conflict in all this is that Joe Public is wary of being sold a product as the solution to a perceived need (even though a packaged product may often be entirely appropriate) yet, for the most part, is unwilling to pay a fee for pure advice entirely unconnected with the sale of a product. As Neil has pointed out, no thought is given to the amount of advice and small services that are commonly available on an ongoing basis without having to pay explicitly for those things.

    Just the other day, for example, a couple of my clients asked for my advice on a solar panels package they're considering buying into. There's some sort of yearly rebate involved which means that after a few years they'll have recouped most if not all of their initial outlay plus they can sell back excess electricity to the National Grid. Why they thought that I'd be knowledgeable about such a scheme I really don't know but I cast a eye over the paperwork and said that as far as I can tell the scheme looks sound BUT, of course, I also pointed out that I have neither the expert knowledge or authorisation to offer any sort of recommendation or endorsement on such a proposition. So that was 20 minutes of my time given FOC, just because they're existing clients. What would have been the response from a purely fee-based IFA to such a request? Sorry, can't help or £50 added to the next invoice?

    The FSA's RDR, flawed though may be, attempts (I think) to address the issue of clients not wanting to be sold a product as the solution to every need whilst at the same time not wanting to pay fees for pure advice.

    Generally speaking, there seems to me to be nothing wrong with trail commission provided the client knows about it, knows what they can expect in return (periodic reviews, I guess) and actually gets it. But that isn't the whole story because, as we know, there's a lot more to having business on one's books long term than providing periodic reviews. Reviews are just the most visible part of the equation.

    When all else is said and done, the proof of the pudding is in its eating. If you're clients are happy with what they're getting from you then they stay with you and hopefully recommend your services to others. If they're not, then they're vulnerable to being poached by a competitor. Those are the simple laws of business.

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  • I think the main reason IFA prejudice is mainly created by the media recreating old stories, which appear to be new. By the time the newpapers, television radio, the FSA and anyone else putting their two pennorth in I lose the will to live. Examples. Some people were sold endowments wrongly and suddenly everyone was sold wrongly. Some people were sold MPPI wrongly and suddenly everyone was sold MPPI wrongly. I am not saying that every IFA is perfect, but not every IFA can be wrong otherwise we would not have any clients.

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  • Just a technicality but...... the fee/commission that your adviser is receiving with regard to the endowment from 1983 (is this still in force???) is likely to be life policy renewal and not, in fact trail, meaning that it is likely to be 2.5% of the premium being paid and is NOT an explicit charge to the contract.

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  • Well done Nic you have just confirmed my pre-conceived ideas about journalists were not conceived but in fact were very true! Need i say more!

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  • "IFAs as an organised group"


    "IFAs are seen as commission-grabbing con merchants."

    Thanks to journalist who sell 'sexy' stories to the media?

    Yes, prejudice, appropriate word. The media should be regulated and have to pay up when a reader acts upon the statements made by glory hunting scribes and loses money.

    How many people have run away from their pension or other investments simply because one writer mentioned 'trail'?

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  • Hmmm.... If only IFAs had a union or association.....

    If I started one, I would call it the 'Association of Independent Financial Advisers'...

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  • I think it is highly unfair that the financial industry, in particular bankers and advisers, some how is behind all what has got wrong and should be blamed and demonised. The government and the regulators turned a blind eye to the risks the banks were taking, both here and abroad. In fact, it created such a boom that the Government felt it reflected well on them, although Mr Brown talked about he has policies had 'got rid of' boom and bust.

    I am not a particular fan of the banks/bankers but they should have been properly regulated.

    The FSA obviously enjoys not being the blamed party. Not enough blame anyway.

    Their existence did not prevent Northern Rock or any of the other banks from virtually going bust. All they have done is to increase the costs in the sector.

    FSA's behavour has lead to that they have not met another one of their statutory aims:

    Their blame culture against the advisers and the subjective treatment of the banks, have lead to that the financial services in this country is mistrusted by consumers. FSA's devisive treatment of advisers is helping the banks fleecing the consumers and making it more difficult for them to obtain independent advise.

    There are new rules coming in for increased capital adequacy, ringfencing retail banking and investment etc, and this will further increase the cost significantly. Where are the funds going to come from? From the consumers, of course. You cannot have two winners, banking industry making high profits to pay for all this, and consumers not being fleeced one way or another!

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  • Aha! So Mr Cicutti admits what we have all known for years. Many journalists won't bother to go the extra mile to provide a well researched story and are also frightened to go against what they perceive as expected by the editor.
    IFAs have to go that extra mile for their clients, however, or risk a complaint (much more serious than the ones journalists get).

    Nic Cicutti also implies that the bad reputaion of iFAs must be justified because "prejudices never come out of nowhere"; or, in other words, there is no smoke without fire. Using that philosophy is what leads to people thinking that most muslims are terrorists, which is patently not true, or, as someone (I can't remember who) a few years ago said all men are rapists. It seems that Nic Cicutti is happy to accept this sort of philosphy, presumably (because he brings it up) due to his own experience of amazement at losing a few pence off each premium to trail commission on his 1983 Scot Am policy. Blimey!
    Everybody knows that it takes a long time to build a good reputation and yet the merest hint of dodgyness, even if it is totally untrue, can destroy it. Likewise most people are likely to believe that any particular section of the populace is worthy of disdain if just one or two are proven to be so. That, however, does not make that attitude right but, as I believe Nic Cicutti suggests, lazyness and fear of journalists helps to perpetuate these myths far more than any individual can.
    I guess he is no exception.

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  • The problem with our industry is that the good we do is never talked about. Interestingly when carrying out a pension review for a client recently he also asked me to look over a quotation for solar panels as he did not understand the way the feed in tariff works. (Must be the latest door to door sale!).

    We do an enormous amount of good but it is never shouted about. We are the people who put a cheque in the widows hands at the time of deep emotional and often financial stress (one client in the last six months).

    We are the people that make sure that someone has an income when they fall ill. (Two clients at the current time).

    We are the people that say to someone on retirement all that arm twisting we did at least you have some pension in addition to what the state may give you (three clients at the current time).

    We are the people that are giving our clients options for income at a time when many are struggling with inflation in retirement.

    We are the people that complete a FOS claim form for someone who has blatantly been given bad advice by someone else in our industry, yet we don't charge as it is for the good of our industry.

    We are the people who do a million and one other things for our clients but never get paid or never charge as they are all goodwill gestures and considered part of our function in the relationship we build with them.

    We are often what is termed a centre of influence and knowledge. 'We know a man that can'.

    Rest assured under RDR that will all go. clients will come into the office, it will be straight down to business, never mind their other problems/issues that need addressing, the clock will start ticking the day they walk in the door.

    I don't think that the FSA or you as a journalist will be happy until you see the lights switched out on our industry.

    However, that will be a glorious day as the FSA will be left with no one to regulate and you will be left with no one to write about so bring it on as I will be long retired.
    I believe I work like many other advisors out there, you get a good case to work on and you get one no so good, but you need to do the work as the client has every right to good independent advice. Yes some clients cross subsidize others, but that is the same in many industries and as long as the client knows what they are paying is it wrong.

    As a journalise in the financial services industry, you will not be happy until you see us all out of business and the public left with nowhere to go.

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