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Changing room
They say that changing is very difficult and that people often revert to type. The announcement that Aviva were allowing up to 10 per cent commission on transfers to their wrap was a major disappointment, only less surprising than their reaction to the press on the same topic. Do their PR team honestly believe that this would gain a posi- tive reaction?
Seriously, Aviva should be ashamed and they cannot hide behind the “we don’t force anyone to take 10 per cent” line, it simply does not wash.
To be fair, they must have thought they were safe when it emerged that Standard was considering a return to the world of pension commission.
I do wonder what changed since Trevor Mathews initiated the commonsense change. I remember penning an article on the break-even points for pension contracts and it worked out at year 18 at a time when seven years was a good run. I was called by two different chief executives who wanted to know if it was their figures I had used - it was not but might as well have been.
I accept that change needs to be phased, I am not a fee snob but knowing that you will get paid for your work is so much more sensible than hoping.
Last week, one of my clients asked me if her building society offered any good deals before popping in to see them. I suggested that some of their investments may suit but told her to avoid a structured product, given the opacity of some. With at least three firms profiting from such a product, it is hard to see many clients truly understanding them.
Understanding the impli- cations of any investment is right up there when we talk about treating customers fairly. Now if we still have people advising who do not know a structured product from a cash account, I despair.
If we are to develop a pro-fession, all in the market need to take part, so why offer to educate advisers one minute, then corrupt them the next. It does not make sense.
Just for a giggle, why not provide world-beating service and keenly priced offerings, then watch the business roll in? At the moment, they resemble wounded animals and that is worrying as they react in unexciting ways and their clients deserve better.
The margins are going to be slimmer and although to date the fund managers have escaped serious reduction in revenue, it is coming. The days of taking an annual management charge of 1.5 per cent plus the same again in “extra expenses” is drawing to a close and not before time. Performance fees are sometimes offered but over what period are they determined? If you are not careful, you could be paying to get your money back to where it was at the beginning.
2013 is not long away. I sincerely hope that those in the market don’t wait until Hogmanay to start their switch to adviser-charging.
The FSA recently said that they were going to be monitoring progress. I hope they ask providers continuing to plug commission and excessive commission whether this is compatible with progress or is it better aligned with desperation?
Robert Reid is managing director of Syndaxi Chartered Financial Planners
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