View more on these topics

Advisers slam LibDems claim they are ‘a doomed species’

Advisers have slammed comments made by Liberal Democrat Treasury spokesman Lord Newby, who claimed that traditional IFAs are a “doomed species”.

Money Marketing asked Newby, who was speaking at a fringe event at the Liberal Democrat conference in Liverpool on Tuesday, what role IFAs will have in the future of financial services.

He said: “The traditional model of the IFA looks to me like a doomed species. I think there will be a drift away from old fashioned financial advice.

“The regulatory requirements on IFAs are so great, the cost of giving advice is so great and I cannot image why anyone would want to do it. It just looks to me really, really hard.”

Newby said his children’s generation would seek advice almost exclusively online.

He said: “I do not think they would want to go through the appalling business of laying out all their details and taking an hour to go through everything the way we did when we were buying financial services products.”

Clancy’s Financial Planning financial planner Jim Clancy says: “I am just aghast by the whole ignorance of Lord Newby. Advisers are there not to sell products but to give advice. Has Newby been to a financial adviser recently? I would like him to come down to my office so I can show him exactly what an IFA does.”

Baronworth Investment Services director Colin Jackson says: “Newby is utterly wrong to say that advice will all go online, you simply cannot offer advice purely online because it is a two-way conversation. All you can offer online is guidance and education.”

Stevens Financial Services director Michelle Stevens adds: “I bet Lord Newby does not make his investment decisions without some advice.”

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. Another comment from an out of touch politician with little grasp of reality , not that suprising then.

  2. “The regulatory requirements on IFAs are so great”

    Exactly Lord Newby. so what is the Con Dem coalition going to do about it ?

    Probabaly nothing.

    With the average age of the IFA 55 – the species is going to be thin on the ground anyway in about ten years .

    + We are moving inexorably towards the European model where the Banks are the major players selling at best mediocre products to uninformed public…

  3. As an Account Manager for a Life and Pensions company I cannot believe these comments either. The amount of experience which this industry will lose in 2-3 years is shocking.

    Comments like these are uninformed and simplistic. Yes, advisers need to be aware of online capabilities but they should be for commodity products only.

    The Government should be championing the need for full advice and the value to be gained from having EXPERIENCED and qualified advisers.

  4. I was not saying that people shouldn’t take financial advice. Far from it. But over recent years increasing numbers of IFAs have told me that it is becoming increasingly difficult to function as an IFA because of the regulatory and associated cost burdens which they face. And it may be undesirable but twentysomethings purchase financial services online.

  5. “The regulatory requirements on IFAs are so great, the cost of giving advice is so great and I cannot image why anyone would want to do it. It just looks to me really, really hard.”

    This is the crux of the matter! and Dick Newby is absolutely correct on this point.

    IFA costs are ever increasing at a time when we are having to do more work for less remuneration and profit margins are being squeezed to a point where in a lot of cases it is just not financially viable to deal with a lot of clients.

    Any business where cost is uncontrollable due to external agencies (FSA, FSCS ETC) and remuneration is on a downward spiral is simply not sustainable.

    Added to this the lack of a long stop and the real risk of advice being challenged in 20 years time just makes you think is this an industry I really want to be part of?

    Chris Neil

  6. Dick,

    I think the message that IFA’s have been trying to get accross to you is that the regulatory burden on IFA’s has become out of all proportion in relation to the risks associated with their distribution channel.
    This can be demonstrated by the number of complaints generated through this channel and the number of these complaints that are regected in relation to the industry as a whole.
    The IFA’s that remain in this industry have worked hard to improve their professional credentials, are committed to best client outcomes, they embrace the concept of treating their cleints fairly and what they need from MP’s is recognition for this and support when influencing future regulatory changes.
    It is extremely unhelpful to suggest that we are a doomed species when so many of us are continuing with exam taking to achieve the new standards exected of us as an industry.

    Paul Wreford
    Chartered Financial Planner
    ISO22222 Approved

  7. Lord Newby

    You are totally correct to highlight that IFAs work under an onerous burden due to the strictures and imbalance of regulation, the cost of the FSA, FOS, FSCS the new consumer education body, etc.

    Unless you and the government believe that the current imposition of arduous regulation is appropriate then it is quite clear that changes need to be made.

    The initial noises from the government focused on reducing regulation and the size/cost of quango’s. If these statements were more than just convenient sound-bites then you need to ensure that consumers retain access to independent financial advice and not leave it stranded on the shelf that can only be reached by the 5% high net worth sector.

    Please interact with the industry to secure the right level of regulation and to ensure that independent advice becomes available to a wider portion of the population.

  8. “But over recent years increasing numbers of IFAs have told me that it is becoming increasingly difficult to function as an IFA because of the regulatory and associated cost burdens which they face”
    So what are you doing about it.
    Are you one of those MPs who listen to constituent complaints and then let them wash over you?
    Why is it that IFAs are being Squeezed out of business?
    Many of us employ secretaries, administrators etc. We purchase supplies from other businesses, therefore, if we are doomed, a lot of people who rely on us may be doomed with us. For goodness sake wake up and take control of this mad regulator before it is too late.
    I am sick to death of mealy mouthed MPs who will not speak up for what is obviously wrong.
    Vote for Godfrey Bloom@UKIP at least he sees what we are up against and tries to help, while the Mark Hobans and Dick Newbys of this world just stand by and let it happen.
    In the case of Hoban he actively encourages the demise of IFAs, because he only engages with the regulator not the regulated, apart from dodging a few questions on citywire.

  9. Dick Newby

    Can you spare me a few minutes of your valuable time? It would be good to talk.

    01341 242625

  10. @ Lord Newby … Let us assume that what you have been told is accurate, and that your conclusions therefore follow.

    However then, let us also assume that you, and your colleagues have an adequate knowledge of current legislation, not least the Competition Act where statutory powers have been granted to the OFT to investigate markets where, for example, there are barriers to entry, expansion and exit – elements of which clearly establish what you have been told.

    Let us also assume that you and your colleagues are also aware that under the FSMA, the OFT were also given (very necessary) powers to monitor the actions of the FSA.

    What – in your opinion – might be the result if the OFT were to fail to fulfil their statutory obligations?

    Might it be the very outcomes of which you are being advised, namely that the actions of the FSA have led to a situation where there are barriers to entry, expansion and exit?

    Consider this link:

    OFT launches review of barriers to entry, expansion and exit in retail banking – here:

    http://www.oft.gov.uk/news-and-updates/press/2010/55-10

    Might it not be wise to consider, no more, the possibility that there have been failures in the overall regulatory system as it affects IFAs?

    Or do you believe despite all the widespread evidence to the contrary that the public has been well served by our regulatory framework?

    More specifically would you, the Banking Commission, or the OFT ever consider (no more) the possibility that a part of the answer to Banking reform in the UK might be found via IFAs?

    IFAs – RIP? Not in my opinion.

  11. Hopes that young people will purchase financial services online are bound to be dashed as they will only purchase what they perceive to be their needs. As with all of us, when we were young, this tends to be short term focused.

    As shown by the changes proposed for the Australian Superannuation scheme, young people are notoriously difficult to get involved in financial planning. (see here if interested – http://bit.ly/cSmkGz )

    The IFA should be promoted more as a doctor providing a checkup, than a surgeon actually carrying out a needed procedure. We all know that it’s worth paying for a doctor who concludes that you are actually in good condition, but self-diagnoses is a dangerous game.

    Fair play to Lord Newby for at least responding to the comments, though.

  12. If regulation of financial services didn’t exist how would we behave differently?

    Would we abandon “know your customer” would we cease to worry about “suitability”? And I wonder would we stop bothering to give risk warnings and stop bothering to explain the costs associated with products and advice?

    I suspect that if the regulator didn’t exist most of us might continue to behave in pretty much the same way as we do now.

    Contrary to popular opinion it isn’t the fact that we are regulated that is the problem it is the preceived inbalance of regulatory attention. For many IFAs the problem is that the Banking sector seems to get away with blue murder whilst the IFA sector with a pretty good track record as far as complaints are concerned and remaining the dominant distributor of financial products seems to be bearing the brunt of regulation.

    And then as if to undermine my views another three IFAs get punished by the FSA for inappropriate selling of structured products.

    Sometimes I think we are our own worst enemies

  13. “I do not think they would want to go through the appalling business of laying out all their details and taking an hour to go through everything the way we did when we were buying financial services products.”

    The appalling business of taking a detailed account of somebody’s finances? Which then enables an adviser to completely understand the requirements of their client. Then, after meticulous research, take an hour to explain why your recommendations are appropriate, detailing the charges and key features. Stopping to answer any questions…

    Why bother? When we can all just set up websites. Safe in the knowledge that we aren’t accountable if anything goes wrong, the product is inappropriate or the client’s circumstances change.

    I spend hours designing investments portfolios for clients. Each one is unique to that client. I then spend time adjusting that portfolio to suit the prevailing market conditions and meet with the client every six months to ensure it still matches their circumstances.

    Show me a website that can do that…

  14. Nick Bamford

    Thank you for bringing balance to the debate, IFAs really do need to speak as one whatever their business model is built upon.

    Is it not the case that the marketing of structured products is flawed? Take the banks (N&P is techically a bank), recently I have seen elderly people invest £50,000 in Santander products because the FSCS has a ‘guarantee’ that if the bond fails they get their money back, this is what the staff imply yet the ‘sale’ is ‘non advised’.

    Yes there is indeed an imbalance in the attention of the regulators but perhaps there is too much focus on the advice and insufficient attention to the manufacture and distribution of products, particularly via banks.

    Until the likes of Lord Newby are fully aware of the damage being done to society by ‘bad policy’ it can only get worse.

  15. Dear Lord Newby

    You are correct in what you albeit said in a clumsy way.
    We deal with mostly bright intelligent educated people all day long who have a few bob here and there. We are relationship based and thus we do know our clients yes some even what they have for breakfast!
    That is why we have survived every change the ever changing regulators throw at us and we will again. We are mad it is true but beats being a journalist, politician or civil servant as we are actually helping people and their families.

  16. Well said that man John Whipple

Leave a comment

Close

Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm

Email: customerservices@moneymarketing.com