Cicutti: Falling in love with IFAs again
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 email@example.com