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Categories:Other,Regulation

Cicutti: Falling in love with IFAs again

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Are IFAs better or less well respected today than they were 10 or 20 years ago? I found myself asking that question after reading Garry Heath’s fascinating article in which he tore strips off Aifa for flapping around on regulatory issues instead of representing its members.

For Garry, “Aifa has no agenda for the sector and no way of promoting one if it had. It sees its task as mitigating disasters at the margin - not fighting for IFAs and their clients.”

Aifa, he claims, was set up as a creature of the Association of British Insurers and deliberately used to chart a less confrontational approach to trade body representation of IFAs, in place of the one previously adopted by Garry and his associates at the IFA Association.

But while acknowledging the hurt and sense of betrayal that Garry feels over events that took place 12 years ago, we also need to be slightly more candid about both the successes and failures of Aifa’s earlier incarnation.

For without that self-awareness, it will be difficult for Aifa or any of its putative successors to successfully represent the IFA community in the decades ahead.

Which brings me back to my original question. Here, my own answer, a personal one, is that IFAs are less well respected than they were. I recall back in the early and mid-1990s how all my colleagues would automatically defer to the notion that independent advisers were qualitatively different in every respect to insurance company or bank salespeople.

Today, it is as if the issue is less important somehow, as if IFAs have somehow been subsumed back into the financial services swamp.

And here’s the rub - while Garry may proclaim the work of the IFAA as being more muscular and successful in terms of representing the IFA community, it also marked the beginning of the end of many of my colleagues’ potential love affair with the independent sector.

Let me go back to the key issue, the one that Garry still hails as a triumph for IFAA - its long-running legal battle against the regulators back then, including SIB and the Personal Investment Authority, over whether IFAs should send out letters to their clients inviting them to take part in the pension misselling review.

Many of you will remember the issues involved - arguing that professional indemnity insurers were threatening to invalidate the PI cover of IFAs who did send out these letters, Garry Heath and the IFA Association went to court to stop it happening.

IFAA won a partial victory and thousands of advisers used this argument against the regulators for 18 months or more, delaying the review of their personal pension clients.

The problem was that it was an expensive victory, in more ways than one. It cost the IFA Association at least £300,000, plus a large slice of the PIA’s own legal bill. Not that this mattered much to Garry, seeing how his battle was backed financially by many insurers - ironic really, given his apparent abhorrence at the way they now fund Aifa.

More significantly, it also involved a fundamental misreading of the pension misselling review itself, not just by Garry but by the whole industry, which managed to score own goal after own goal on the issue.

For example, how could any sane person have considered it good PR for insurers to challenge the right of trade unions, including the Royal College of Nursing, to take legal action on behalf of their members over this issue? Yet I remember the Pru, among a raft of companies, arguing in court that representing nurses who had been missold a personal pension was an “improper activity” for the RCN to engage in.

Meanwhile, tens of thousands of victims of misselling were dying with significantly smaller pensions than the ones they had been transferred out of.

Some people understood the dangers of this approach. I recall Gareth Marr, still a long-standing adviser, saying: “If we are seen by the public as standing in the way of giving people the compensation they are entitled to, then it will lead to a massive loss of confidence in our sector.” His view was a minority one, sadly.

Year after year of delay, in which insurers, IFAs and regulators were widely seen as failing to clean up their act, led to a far more aggressive approach towards the industry by the Labour Government in 1997 and later years.

More significantly, it also meant the clock started ticking for the kind of legalistic obstructionism Garry and the IFAA were once so keen on - hence the creation of Aifa that same year.

Reviving the IFA sector will require a strong trade association but - and here I differ with Garry - the IFAA is no longer the right template. A new, visibly pro-consumer approach is needed to make us fall in love with IFAs all over again.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Readers' comments (18)

  • Wasn't that a legitimate defence Nic? If you crash your petrol scooter into a mobility scooter you should not admit liability or invite a claim because your cover will be declined, read your policy.

    "IFAA won a partial victory and thousands of advisers used this argument against the regulators for 18 months or more, delaying the review of their personal pension clients."

    Sounds much better than what the banks did with PPI, and still are! We need a Cicutti rant about that in order to bring balance to the debate, or is that impossible?

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  • Not to worry Nic. IFAs' will cease to exist in any significant number over the next ten years. Who will you turn on then?

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  • Nic
    It is very difficult to agree with this statement that you seem to agree with “If we are seen by the public as standing in the way of giving people the compensation they are entitled to, then it will lead to a massive loss of confidence in our sector.”
    What exactly are they entitled too and from whom and why?
    Look carefully at the background of many IFAs, where they came from, and you will see they have been selling legitimate products for a long time, that suddenly become wrong, and the after a time become right again!!
    It would not be a wise thing to back such a ridiculous scenario!
    And yet this is exactly what has happened.
    No wonder people and organizations have fallen out of love with their IFA.
    Look carefully at where a very large number of the product sales came from and you will see they have been from the tied sector where ,heavens forbid, the salesperson is less tan trustworthy!!
    I have seen many failed life Inspectors,protected by their Product provider employers when they gave poor advice,turn to become an IFA,and likewise many 'tied sales people 'have done the same-jumped ship to the safety of the IFA (out of the frying pan into the fire)
    Qualifications mean little or nothing when the person is a trusted adviser,and similarly when the sales persons background has been to progress 'through the ranks' does it mean they are any better than before?
    I think not.

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  • Maybe the reason that IFAs do not seem to emerge out of the FS 'swamp' is because that is what the regulator has created with constant and expensive tinkering that, as you say, has done nothing to help the consumer. Ten years ago you dealt with an insurance company representative or with an independent adviser. It was quite simple and easy to understand for all concerned, most importantly the consumer. Now we have a god awful mess, which is getting messier at great expense, that even those within the industry are having difficulty getting their heads around. So where does that leave the consumer? Unsure, unclear and confused; of course it leads to mistrust!

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  • With the compensation culture backed by greedy lawyers, a regulator that constantly moves the goal posts and a FSCS and FOS that needs to encourage claims to 'stay in business', is it any wonder that confidence in IFAS may have fallen ?

    That said, most clients who have come to know an IFA usually only have positive things to say. It is the press and people who have no experience of using an IFA who hold the negative (and often unfounded) view.

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  • The Pension Reviews marked the lowest ebb in this industry.

    No, I am not talking about mis-selling I am talking about the venal imposition of mass mailing to clients inviting them to have their plan reviewed.

    The invite letter had to include a pre-paid envelope, a form for them to complete and a glossy brochure (R U Owed style). The postage and envelope came to £1 each in todays money.

    The 1990 advice was then studied using 2000 hindsight and the timing was catastrophic because the stockmarket fell like a stone between 2000-2003 which virtually guaranteed a loss when the benefits were calculated and compared.

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  • Whatever is said you always felt that Garry Heath via IFAA tried very hard to support and elevate the services of IFA's. There were (and are) some very big players happy to see the demise of IFA's so Garry had to be combatitive and he led from the front. I had cause to meet him and admired his qualities. Of course things have changed in the market since but essentially the client still requires quality 'face to face' regulated advice and I would suggest with some prospect of continuity. I am less convinced of whether 'independent' means much now.

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  • Meanwhile, tens of thousands of victims of mis-selling were dying with significantly smaller pensions than the ones they had been transferred out of.
    Really?
    Final salary schemes raided by employers with no action taken by the Government.
    Pension scheme valuations signed off but subsequently found to be grossly underestimated.
    AVC's into the main scheme calculated in final benefits(I always recommended FSAVCs where the main scheme did not give the guarantees of non inclusion-was this wrong?)
    Changes to pension age which meant ERO's had a larger penalty.
    Change of the main scheme from FS to MP or similar-again the FSAVC is a winner but was deemed to be a mis-salel!! Irony or what?
    Come on get your facts right!!

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  • OK Nick give up your human and common law rights, have no right off appeal against someone taking you to your regulator and allow them to ignore the 15 year long stop, proove you are innocent and even then have your evidence compleatly ignored and have no organisation to join, that speaks on your behalf.
    I have said it before and will say it again the FSA is out to get rid of the IFA and leave the banks to get bigger on tax payers money buy up the Insurance companies and take over Retail Distribution for themselves.

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  • Nic, you are the Banks court jester. Please Moneymarkleting can we have someone who is impartial please?

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  • Not bothered reading the drivel written by Nick. Just need to say he needs to get a proper job .....maybe a traffic warden if they will take him

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  • I am sick of this to say the least, I have been dealing with the same families and their referals for 34 years they don't seem to be complaining and I am not unique.

    Ask people what they think of their IFA you may be suprised.

    Sorry no one reads good news I must be very stupid and unreasonable to suggest this, spank my bottom while I sod off back to my padded room with all the other crooked, commission grabbing IFA's.

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  • Question :- Is Nic Cicutti More of less respected then 20 years ago? Answers on a post card please.
    My god Nic I read a lot of your Hogwash over the years but this takes the biscuit. Had Gary Heath been our leader RDR would not be happening in the same way as is today. Aifa did nothing apart from a threat of a judicial review in 2009 that never materialised and in fact they now deny it was ever stated.The fact that you now try to put the blame for the introduction of the FSA and RDR at Gary's and IFAA's door is bordering on ridculous, much like most of the stuff you write!!!

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  • Sorry I am late to this one but I have just come back from London after a very agreeable lunch with an AIFA member to find all this has kicked off.

    The Pension Review Judicial Review was not just about PI and IFAs. It was principally about whether policyholder and shareholders should have their funds redistributed at the whim of the regulator who was ignoring the civil law which up to then had been the way financial disputes had been resolved.

    Old fashion concepts Nic, like you need to complain before you get compensation. I doubt many see the current world of ambulance chasing which followed as being very endearing. We got financial support from all over Nic but we didn’t see any courage and leadership the issue
    deserved

    The battle we faced hasn’t changed. Are we, advisers and clients, to be slaves of the big forces; Government, regulators, nationalised banks and providers? Or are going to run our own affairs and have choice and freedom? IFAA represented choice and freedom especially for clients.

    Either way that was the past and long gone. I am not suggesting we move back to a retro IFAA. The IFAA was a totally different body in its last 3 years than when it started anyway.

    Is anyone suggesting that RDR is beneficial to the majority of clients? Most are not going to able or willing to pay fees. Who gives the regulator the right to tell Parliament to get stuffed or demand consumers only pay for their advice in cash and introduce it without any research worthy of the name?

    What is needed is one association that is not restricted in its strategy or tactics, which has grass roots and listens to all its members. It also needs to be properly funded and yes you are right on this one Nic, speaks both for its members and their clients. It will must fight the excesses of regulation. Cut its costs and scope, strengthen who it reports to, and stop the way larger players are allowed to play the system.

    For instance; in his RBS report Sir David Walker claimed they were too busy introducing Treating Clients Fairly and stiffing Equitable Life clients to notice one of the largest banks in world was a stable as an one legged ice skater. And where is TCF on the issue of insurance companies selling accident details to ambulance chasers increasing the costs of policyholders or PPI sales by banks? Some Pigs are more equal than others – Nic and it has to stop.

    Is anyone suggesting that RDR is beneficial to the majority of clients? Most are not going to able or willing to pay fees. Who gives the regulator the right to tell Parliament to get stuffed or demand consumers only pay for their advice in cash and introduce it without any research worthy of the name.

    The question for all IFAs is do they pile into AIFA and give it a very necessary income, grassroots legitimacy and the support to make it a real force for good? Or do IFAs start again? I suggest we do not have the time to do the latter so the question is how can we do the former?

    Neil Liversedge has been challenging IFAs to join AIFA and reform from within. Good Idea - but AIFA overall needs present an immediate and cogent picture on where it’s going. Then IFAs can get involved, control of their voice and start to influence the big issues. Either way it is going to cost IFAs cash.

    I hate where all this has ended and if I can help in any way I will

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  • Right, let's tackle this nonsense in order.

    1. I agree that IFA's - as agroup - are less well respected nowadays, but this is only true based on surveys of samples of the population usually conducted by the self aggrandising Failed FSA. IFA's in their local area and among their introducers and clients are vastly more respected today, not in the least because many of us predicted the financial diusaster that was new labour.

    2. 'Mis-selling'. In general Mis-selling is a onsense concept. It is a weasel phrase used by Fabianistic socialists to justify more interference in the freedom of all of us. However I do agree that much of the 'advice' provided to those in public sector pensions was flawed. There are two cases to answer. One, for IFA's 'professional responsibility' , and two for banks etc 'caveat emptor'. The argument Garry held, quite rightly, was that soliciting claims would compromise IFA's PI cover. Furthermore I met an actuary for I think NPI, who had been quizzed as part of the MP's committee looking into the whole pensions thingy and he was appalled at the politicians attitude. Clearly they had no grasp of the facts and were simply using this whole ferrago as political capital. And, many of the clients I have subsequently met who had been taken out of state employee schemes most had seen it as a way to save money in the short term. Overall the pensions review like the endowment review was entirely flawed and based on politcal expediency, not equity and certainly not common sense. IIt was this, not the sales and purchase of alternative pension products itself, that precipitated most of the problems in sorting the mess. Oh, lest we forget the government itself was encouraging people to have personal pensions and to contract out of SERPS.

    I began as an IFA in 1992 and had seen much of the failings of the exsiting IFA business model and went in the a new way - now cllaed New Model Adviser - as did mnay other IFAs as well as far sighted existing businesses. In other words the industry itslef was already sorting itself out. All tthe advent of sclerotic regulation did was to inhibit this market process. Regulation is largely to blame for the chaos we now see, not IFA's.

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  • @Garry : do IFAs start again?? It must have been a very good lunch to persuade you to - er - adjust your position from the last time we discussed setting up IFA Centre.
    If AIFA as it claims to, speaks for 80% of IFAs with 20% of firms in membership, then there's 80% of directly authorised firms who if every single last one of them joined AIFA would still only represent the minority of the membership mostly because two firms alone represent 65% of all IFAs ... but they won't be IFA's next year - they will be Restricted.
    Nic wants to fall in love with IFAs - not Restricted advisers - so let's show him an Independent Advice community that no journalist coming up to Valentine's Day could fail to feel romantically inclined towards!!

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  • Dream on Gillian.

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  • The 'independent' v 'restricted' argument is not one between competing classes of adviser.

    Nor will the 'independent' tag necessarily denote superiority.

    The majority of advisers who will unwillingly fall into the 'restricted' category will have been pushed there by a regulator determined to rewrite the dictionary.

    'Restricted' advisers will still be agents of the client and will still have the capacity to trawl the whole market.

    If we start arguing over status it is yet another wedge that the vested interests will use to divide us.

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