JS&P Towry Law chief executive Andrew Fisher called for five major changes including the abolition of all initial and trail commission to advisers.
But Informed Choice managing director Nick Bamford says he wants to know whether Fisher has “put your money where your mouth is”.
In an open letter published below, Bamford asks Fisher to confirm that none of the advisers employed by Towry Law receive commission in any form from new or existing clients.
Bamford says: “In respect of the first of your five specific changes, if Towry Law has not changed already 100 per cent away from existing and new commission payments then I am afraid you will see why the financial services industry will lack confidence in your assertions.”
Norwest Consultants principal Harry Katz is also questioning Towry Law chief
executive Andrew Fisher over its ‘anti-commission’ stance.
Katz say: “One of the biggest problems firms like Towry have it that when advisers leave they can take clients and trail with them. By abolishing trail they maintain greater control. Does Fisher think some of us are born yesterday?”
Katz asks whether existing trail could be abolished under the Towry model, as it falls under the law of contract.
Katz says: “With transparency, all falls into place. I wonder how transparent his fee charging would be? Would he charge by the 15 minute interval and would he charge for reading client letters and cups of tea when they come to the office?”
He also says this approach neglects the less well off, leaving them to the mercy of the banks and direct sales forces.
Katz says: “How about leaving IFAs alone and trying to fix where the problems really are. Less chatter and more sense all round would be most welcome.”
The letter from Bamford is published below.
Re: Your Open Letter to the UK Retail Financial Advisory Industry
I find myself wanting to agree with your campaign to improve the integrity of the financial services industry (although from where I stand I would much prefer it to be called a profession rather than an industry) but I need some reassurances that you have, so to speak “put your money where your mouth is”.
Your discussion document (published on your website) as well as your open letter to the media, published this weekend, makes interesting reading.
Perhaps you would be kind enough to answer the following questions so that we can all see that your leadership in this area is backed by action rather than just words.
You raise five important points in your discussion document and open letter and I have a number of questions in response.
1. Fees not commission – the abolition of the payment of all initial and trail commission to financial advisers.
Of course this may well be one of the outcomes in this week’s Retail Distribution Review from the FSA. Can you confirm then that none of the advisers employed by you, or indeed Towry Law itself, recieves commission in any form from existing clients and their products or from new clients? In other words one imagines that you have told the product providers in respect of all your existing clients to cease immediately the payment of renewal commission and that you do not use “commission offsetting” as a device for the payment of client fees?
2. Education not ignorance- the imposition of higher minimum educational standards within the industry.
In your discussion document you point out that you will “ultimately require your professional advisers to reach the Chartered Insurance Institute’s Chartered Financial Planner qualification”. Can you tell me how many of your advisers have achieved this status to date and what percentage of your advisory team this represents? Can you also define for me more certainly what “ultimately” means?
3. Integrity not stealth- the outlawing of “soft commissions” given by product providers to financial advisers.
As we already have a robust process for commission disclosure I can only imagine that you mean by this such things as technical support through help desks and websites, conferences and workshops provided by product providers and support from employed consultants of the product providers, perhaps you also mean corporate entertainment events as well? Perhaps you would be kind enough to confirm that Towry Law and its professional advisers never use any of these facilities?
4. Holistic not limited – a requirement that financial advisers demonstrate their ability to offer holistic advice based upon the financial objectives of the client.
In your discussion document you point out that “There is not an adviser working today that is able to provide the best advice to all clients in all circumstances without the appropriate technical support”. I do not disagree with you but can you prove that Towry Law has the ability to do this? I suspect that the same accusation could be levelled at you by other practitioners in the industry.
5. Independence not tied – more stringent tests before financial advisers can use the “independent” label, including not accepting financial or non-financial support from, and not being significantly owned by, product providers.
You do not say, so perhaps I can ask, what do you mean by significantly owned? Is 5 per cent significant, is 20 per cent? Where does the limit fall? Your discussion document points out the dangers of such ownership. Will you go further and state that there should be no ownership by a product provider at all for the independent status to be available?
As I said at the start of this letter I find myself wanting to agree with much of what you say. However, if you want to lead the change to the financial adviser industry you will no doubt accept you must do so from a position of having first done that which you ask of others.
In respect of the first of your five specific changes if Towry Law has not changed already 100 per cent away from existing and new commission payments then I am afraid you will see why the financial services industry will lack confidence in your assertions.
I look forward to the answers to the above questions
Nick Bamford APFS AIFP
Chartered Financial Planner
Joint Managing Director