Intermediaries were once considered to be salespeople rather than financial professionals, who provide advice.
However, this has changed and the industry needs to change with it. Investment products with high commission have come under fire but perhaps that criticism has too often been aimed in one direction.
Advisers have been adapting to this criticism and the changing environment, cleaning up their collective reputations, leading to the greater adoption of fee-based structures and greater concentration on servicing their clients, rather than selling to them.
But perhaps it is time that the product providers caught up.
More advisers are using a form of fee structure but product providers are still creating products which feature hidden charges and commission structures.
The salespeople of product providers need to start treating IFAs the way that IFAs treat their clients, with a focus on building relationships – something most providers are not very good at, according to Alan Steel, chairman of IFAs Alan Steel Asset Management.
He says traditional life companies are much worse at building relationships than straight fund management firms.
Steel says: “As IFAs, we have been trying to build on our relationships with clients but we should also be a part of that chain and product providers need to have a similar attitude to us – stuff high commission, look for clients who will stay.”
Hargreaves Lansdown head of research Mark Dampier believes product providers’ sales teams, in particular life offices, are overpaid and think little of their clients’ needs or even the needs of the end-users.
Some advisers believe there has been notable improvement in service areas but a lot more has to be done, with providers accepting greater responsibility, communicating more effectively and making the investment process smoother and easier.
For example, Steel cites a company he spoke to recently which raved about one of its fund managers so much that Steel decided to include that manager on his buy list.
But he says what the group failed to tell him is that the manager was being replaced on the portfolio with someone else in a matter of days. This level of communication and service, he says, is appalling.
Steel says: “It is a fundamental flaw in their process that they do not think it is important to treat us the way we are expected to treat our clients. It is not rocket science, it is long-term care of a relationship.”
He mentions other examples, highlighting that, in some cases, if clients want their pension benefits it can take a month to process this request while in another instance he found that it can take up to six months to switch a pension from one fund to another.
Even a simple request for information can be difficult, although he tempers what could be a sweeping condemnation of the industry to highlight some firms that have outstanding service levels, such as Selestia, New Star and Jupiter.
The Association of Independent Financial Advisers has also found that the responsibility for the value chain of advice needs to include providers more, with improvements to their service levels overall.
In January, Aifa issued a response to a recent FSA consultation paper on provider and adviser responsibilities. It said providers need to take responsibility for initial flaws in product design and cannot offload this on to advisers once the sale has been completed, with providers called on to review the quality of their distributors.
Aifa director general Chris Cummings says: “There must be a clear line between the respective responsibilities of providers and advisers.”
Aifa director of public affairs Tracey Mullins says although efforts are being made to improve service intermediaries, it still hears a number of complaints regarding this.
One particular problem area is the communication of product information. Mullins says IFAs receive principles and practices of financial management from various groups, with the aim of providing them with relevant details to explain products to clients.
The problem is that there is no uniformity of PPFMs in the industry and with the technical nature of the information, it is difficult for an adviser to use in comparisons for clients.
Platforms and wrap services have improved the situation but this adds another business sitting between the provider and the intermediary, taking care of the issues, rather than the providers themselves changing.
Steel agrees that speed and administration issues have improved over the years but there are many companies with old business attitudes which have not kept pace. A few that are changing are doing it as a defensive move, rather than realising that they need to adapt.
Dampier is harsher, noting the better the technology, the greater the complexity of the systems leading to an overall level of admin that is awful. Wraps and platforms have become like the back-office systems for IFAs but that has not solved the issue at the provider level.
It seems that the relationship between IFAs, life offices and fund managers have changed for the better over the years, but there are still some issues that need to be improved for the good of the final client.