“Unanimous” is how Apfa described the decision of members to merge with the Wealth Management Association earlier this year.
It wasn’t being loose with that word: not a single member of the adviser trade body dissented when push came to shove.
Some called it a “shotgun marriage”, speculating over the financial health of Apfa in particular without a larger organisation to prop it up. The deal certainly moved with the speed of a bullet: the new body came into being just nine days after Apfa’s vote.
It will be interesting to see how the merged body’s campaigning position plays out going forward. It strikes me that there are a number of tensions between what wealth manager members and what adviser members will want it to shout about.
In the era of vertical integration, it is important to note that the interests of wealth managers and advisers may not necessarily align due to provider ownership of the wealth management piece.
We recently asked Pimfa for its thoughts on this, and received the following response: “Pimfa will develop the agenda for advice and investment management for the private client and continue with input into things such as the professional indemnity insurance review, Mifid II and the drive for proportionality in regulation that directly impacts the cost for members and their clients. We will also continue to press on concerns held by members related to the Financial Ombudsman Scheme and Financial Services Compensation Scheme.”
Let’s examine these areas more closely. For wealth managers, FOS complaints have never been made to sound like as big a deal as they are for IFAs.
Without significant reform, FSCS funding is a zero-sum game: if advisers pay less, providers, who own WMA members, pay more. The Association of British Insurers is currently fighting tooth and nail to stop providers contributing more to the lifeboat fund. Many of the firms that are part of that organisation also have wealth management arms that are WMA members.
Managers might actually end up fighting against measures that improve consumer protections for advised clients, for example Mifid II rules on testing the appropriateness and suitability of particular products. Surely managers would want their products to take the easiest route possible into advisers’ hands?
And what about fund costs? Cheap for advisers can be bad for managers if it results in their margins being eroded. And professional indemnity insurance? Big wealth managers are traditionally viewed as safer than small IFAs, so why would WMA members want that to change?
The flipside, or course, is that in the era of vertical integration, providers are also owning advisers. The argument Pimfa made at the time of the vote was that the lines between wealth management and financial advice were blurring. This will undoubtedly leave advisers with, say, discretionary permissions, better served.
But with former Apfa policy head Caroline Escott having left, and former Apfa director general Chris Hannant soon to leave after serving a spell as an adviser to Pimfa, the pressure is on the new trade body to prove it can fight for the small IFAs that still make up the majority of the sector.