Sparrowhawk Financial Planning,
Q: Given that there must be a major concern within the Government that we have an aging population insufficiently prepared to fund for its needs in retirement, why does the Government not harness the expertise and experience of professional IFAs and work with them to encourage the savings habit within the UK?
A. Clearly promoting mass-market savings is an important and desirable goal and the work of my review has this closely in mind. It is clear to me that the structure and workings of the retail financial services industry have a direct and important impact upon the propensity to save in this country. I am not yet in a position to say how the resources of all sectors of the industry, IFAs included, can best be harnessed to further this goal.
Little & Georgiou IFA
Q: We already have disclosure of commission and key features' documents showing early surrender or transfer values and also the facility to reduce commission and improve the terms to the investor. Can we not, therefore, leave it to the investor to decide whether he thinks the charges currently levied are value for money?
A: Ultimately, the only person who can decide whether a service represents good value for money is the consumer. However, there is evidence that many investors are not clear about what the charges are or even who is paying them and a widespread concern exists that the present disclosure regime may not be particularly effective.
There are also interesting questions to be posed about the ability of the average consumer to form and act in a timely way upon judgements about value received. That is why I believe this to be an area that warrants further investigation.
Q. To what extent does your project “access all areas?” And to what extent do you feel that industry vested interests will mitigate against successful implementation of the objectives you have outlined for investigation?
A: I have a broad remit, which is set out at the front of my consultation document, and I have a clear understanding with the Government that there are no areas that are “off limits”.
The industry has responded very positively to the review to date and recognises the objectives of efficiency and consumers being well served are clearly in its best longterm interests.
Inevitably, there will be proposals arising from this review with which certain industry participants will disagree, in which case, there will be debate. But that is a normal part of this sort of process.
David Yorke Financial Planning Strategies,
Philipstoun, West Lothian
Q: As an industry, we are continually assured that you are independent minded and are “your own man” and so I would address the following question – what is the motivation behind yet another report on my industry and what assurances do we have regarding its objectivity?
A: The proposal for the review was made by the Myners review of institutional investment and, if you want the full thinking behind it, you would need to read the chapter of the Myners report dealing with life insurance.
But briefly, Myners, in seeking to understand investment decision-making by institutional investors, found a number of factors, such as the end-consumer's lack of understanding, distorted competition in the retail savings market.
The Myners review therefore concluded that it could not be assumed that the competitive process was necessarily delivering efficient allocation of capital or the right outcomes for consumers and therefore a further review was necessary. As far as my objectivity is concerned, I can assure you I have no hidden agenda either of my own or from the Government and I have an entirely open mind about the possible conclusions I might reach.
Q: Are you seeking to make AFPC G70 paper or UKSIP Investment Management Certificate compulsory for the conduct of certain types of investment business by IFAs or is your intention to simply encourage IFAs to take a more proactive interest in the subject of investment at a generic level?
A. It will be some considerable time before I am able to formulate definite views on such a question.
Q: It appears that you are unhappy with the current levels of investment knowledge displayed by IFAs. Bearing in mind we have seen many fund management groups get it disastrously wrong by launching technology and other specialist funds, do you therefore think it appropriate to demand investment knowledge of IFAs' superior to that of fund managers and current investment knowledge benchmark examinations, particularly when you consider that most IFAs work in the retail end of the industry in a generalist capacity and have to make decisions based upon available research, much of which is published directly or indirectly by the product providers?
A: I have certainly never suggested that IFAs should have superior investment knowledge to fund managers or even the same knowledge. The role of IFAs and their involvement in investment is very different to fund managers. But it is equally the case that the investment content of the FPC is low and many people believe this is insufficient. While I am keen to hear all sides of this debate, this is clearly an issue that I have to take seriously.