First, can we demystify commission, please? Can you think of any sector where the worth of its premier distribution channel is measured in terms of the percentage of a scale invented by a regulator which ceased to exist 10 years ago? I do not know – and do not want to know – what 137 per cent of Lautro means. I can tell you – as a consumer – that it sounds pretty dodgy.
I reckon a sizeable chunk of regulation has its origin in a belief that the commission system puts providers and advisers in an unholy alliance. If we fixate round Lautro scales, that conclusion can seem quite reasonable. Ron Sandler – at the Aifa dinner in 2001 – described commission as an interest-free loan by a provider to a consumer to pay for the cost of advice over the lifetime of a product. Put like that, you can see why consumers prefer to pay by commission. Couched in arcane percentages, surrounded by smoke and mirrors, it seems like a conspiracy against the public. Advisers can show they are worth what they get but it does not help if the system is impenetrable. The menu can be the vehicle for dispelling the smoke and breaking the mirrors.
Second, one of the windmills at which I have resolutely refused to tilt is that of press regulation. I have done this, incidentally, on the grounds that their lawyers are better than ours and that journalists will effortlessly stay within the right side of regulation while still inducing you and me into paroxysms of wrath. I also believe in freedom of the press.
But I do reckon that a goodly proportion of the negative stuff about IFAs originates from other IFAs. I am not talking about those who whistleblow on defective products (pity journalists did not take some of the warnings about precipice bonds a bit more seriously) or even defective firms, I am referring to what is little more than point-scoring. Some IFAs do take on the role of our local electrician, complete with sucking of teeth and “Who put that in for you then?” I am not sure it does anyone any good. It only leaves the impression that financial services are not to be trusted. Can I also remind you to remember how much press comment is positive about IFAs and suggests that readers seek independent advice. Cue applause for the sterling work of IFAP press services.
Third, have you got to terms with the menu yet? So much depolarisation talk is about the industry; who’s on whose multi-tie panel etc. Has anyone been focusing on what goes in their menu? For those thinking of a multi-tie, has anyone worked out how they will explain the multi-tie concept to an existing client? These are not optional diversions from the real job of industry restructuring. They matter. Yet the calls Aifa gets suggest that some firms are still assuming that they can let the changes post-depolarisation wash over them.
It is for real but it could be an opportunity – if you put in the thinking time.
Paul Smee is director general of Aifa