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Aifa: There is no advice without advisers

Recent discussions have confirmed my initial impression that the advice sector is valued but advisers are not.

The Government and its agencies often see financial advice as a solution to problems. For example, the Government is looking to introduce a voluntary code to cover incentivised transfers from pension schemes, as it is concerned that members of schemes are being unfairly induced to agree to changes that may not be in their best interests. To help address this – financial advice. The Pensions Regulator is also concerned about employers being able to navigate the challenge of auto-enrolment and enable employees to make good decisions. The solution – financial advice.

In fact, the Government is so keen on financial advice, it is spending £80m of the financial services sector’s money to revamp the Money Advice Service, the intention being to provide mass-market generic advice.

When I say advisers are not valued, I do not believe there is some anti-adviser agenda that is being pursued by financial regulatory authorities and the Government but there is a carelessness about their behaviour. They seem to be unaware of the cumulative cost their decisions have and to miss the important point – that there is no advice without advisers.

Just this year, in terms of direct costs, we have seen a big increase in FSA fees and more recently the FSCS supplementary levy of £60m. Obviusly, there are the preparatory demands of the RDR and adapting to the significantly altered environment, which, on its own, represents a massive challenge. There will be a new regulator, keen to show how different it is from its predecessor and make a mark with its new powers. The retail conduct risk outlook (which firms are expected to read and assess whether they are acting appropriately) highlights a wide range of concerns the FSA has identified for further investigation. Even if regulator reviews or other supervisory investigations give a sector a clean bill of health, it takes time and resources to track what is going on and respond to the conclusions.

This all adds to the cost of doing business, and so the price of advice to consumers, reducing demand which, eventually, will put firms out of business. The new regulator will have a statutory objective of ensuring that financial services markets function well. I think that a key characteristic of a well functioning market is that it can meet the demands of consumers in general. There is a risk that by loading ever rising costs on to the sector, it becomes increasingly costly to provide a service that ends up beyond the means of more of the population. If financial advice is a good service that provides an answer to the problem of managing the complexity of an individual’s financial needs over their lifetime, the Government and regulatory authorities need to consider their actions in a wider context if they are to better enable access to financial advice.

Chris Hannant is policy director at Aifa

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. “I do not believe there is some anti-adviser agenda that is being pursued by financial regulatory authorities”

    Believe what you want, but the facts speak for themselves

    The FSA and the Government have pursued a course of action which is deliberately designed to reduce the number of authorised advisers especially at the older end of the spectrum.

    There was no other reason for implementing RDR in its current perverse format.

    There was no other reason to ban commission on financial product sales.

    There was no other reason to introduce a cliff edge, non grandfathered minimum qualification level (to be paid for at our own expense) which was designed to get the older end of the adviser spectrum off the books.

    The iFA sector was the most trusted, respected and least complained about sector of this industry, but the sledge hammer approach to change has and will continue to have the allegedly “unintended consequences” of seeing millions of mass market consumers left without the facility to take affordable advice.

    You only have to look at the legal profession to see how costs for consumers have risen beyond all measure of affordability.

    Taking legal advice has become the privilege of the well off and legal aid has all but virtually disappeared, unless of course you enter the country illegally, have no visible means of support or extol the virtues of killing and maiming innocent civilians, then of course you are kept in luxury and when you come out of jail, given a wonderful larger house at the taxpayers expense in which to house your family.

    Country’s gone to hell in a handcart.

  2. You know that and I know that Chris but our policy makers clearly don’t know that.

    If only we had had a really good, strong, articulate trade body to represent our interests through all of this regulatory change.

  3. Well that’s told them!!

  4. “When I say advisers are not valued, I do not believe there is some anti-adviser agenda that is being pursued by financial regulatory authorities and the Government but there is a carelessness about their behaviour. They seem to be unaware of the cumulative cost their decisions have and to miss the important point – that there is no advice without advisers.”
    Same old AIFA, still not looking after adviser’s interests. Still think ex members freeloading off their ‘in touch’ expertise. I don’t think so, AIFA – give up the pretence, I think you are either a wolf in sheep’s clothing or really out of touch with IFAs!!!!

  5. Of course the imparting of knowledge is valued but the question is just how many members of the public are actually prepared to pay for it. Wherever possible, I try to charge fees for the provision of advice as opposed merely to recommending a product but, if I had to survive just on fees, my little business would swiftly wither and die.

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