So, farewell then, FSA projection rates. An FSA discussion document will shortly canvass the idea of scrapping the projection regime.
I have never understood why the regulator should oblige firms to offer figures which may well turn out to be spurious in the light of events to consumers who are unlikely to understand the economic variables.
But will their absence create a vacuum for advisers? I suggest that this may be a further driver in the direction of good follow-up work with clients. The problem with projection rates, especially with the regulator's sanction, is they look far more authoritative than they are. They need to be kept under regular review by a qualified adviser as part of continuing contact with the client. This is another demonstration that after-sales service can be the IFA's secret weapon (and be set out in the menu as an indication of what value is being offered by the adviser).
I do believe it has been concerns over commission, however exaggerated, however misplaced, which lie at the heart of many of the regulatory initiatives of the last decade.
Commission has been long misunderstood but it is for the industry to clarify the misunderstanding. It should be put in its proper place as a means of paying for a service, not as a central concept in its own right.
Of course, the willingness of consumers to use commission as a means of remunerating advisers has to be recognised. The real task for the industry is to show what the commission is paying for. It should not be a means of concealing costs and sheltering behind the myth of free advice. If advisers are worthy of their hire, then they have to be confident enough to set out their services, secure in the belief that their value for money is unquestionable. The menu should be the means for doing this. But again, the menu is a means, not an end in itself.
That is why I am so passionate in pushing the industry to make the most of the menu as a vehicle for showing both their value and their value for money. If the industry decides that obfuscation is the easier and more comfortable option, then others will come in with ever more complex means of disclosure and with little appreciation of how cost must always be related to value.
Paul Smee is director general of Aifa