To: David Severn
Head of department, conduct of business
Financial Services Authority
I have been an IFA for nearly 15 years and was previously a branch
manager of Lloyds Bank. I have had my own business for nine years.
There are a number of questions which I think have been shown up from
the review but one of them seems to be that genuine independent
advice has not been available to low-paid people.
I cannot see how presenting such a person with a fee agreement the
moment they walk through the door is going to be conducive to their
taking up our services.
I have numerous so-called “working-class” clients, most of whom find
my advice invaluable and all of it has been free, except when they
have bought a product. Only one in four of the times one sees people
leads to a sale.
There are a number of other matters which I feel have not been
addressed at all. For example, there has been talk of commission
bias, particularly in bonds. If only the N11 day had been kept to,
when it was suggested some years ago that commission on bonds should
come down to the same as unit trusts over a period, namely,3 per cent
plus 0.5 per cent renewal. That would have done away with that
problem and yet it was quietly dropped.
Sometimes I have recommended a term policy and, even though the banks
are more expensive, people have felt they have to go back to the bank
and sometimes have had their arms twisted that they will not get a
I do feel that much of what you have suggested will push people
straight into the arms of the banks, who are generally uncompetitive
and certainly will not go in for pro bono business.
I have recently been dealing with a couple where the husband has
cerebral palsy and the wife severe rheumatoid arthritis and, although
he holds down a job, will not be able to work much longer. He has
been told by the Benefits Agency they could not tell him how much he
would be entitled to and the Citizens' Advice Bureau was equally
unhelpful, saying he would be “all right”. I have taken up the
cudgels on behalf of this working-class couple. I am doing all this
work on a pro bono basis, which the banks certainly do not. This is
typical of many IFAs. If I had to present them with a fee agreement
to begin with, how on Earth would they pay it?
I should also mention I work for the Consumers' Association and the
Chartered Insurance Institute, setting exams for the latter. This is
something which many IFAs do. The CII does not pay particularly well
and it costs me money to be away from the office.
Another thing that is suggested is that we do not recommend National
Savings. This is rubbish because the National Savings Organisation
has a special IFA helpline, which is often engaged. They also supply
me with special literature, application forms and so on as they come
I once dealt with a working-class couple for four years without
earning anything and then, when one of their friends was left some
money, they came to me because they knew I would not force them to
buy something they did not want.
That is the nature of the business and it is obvious that the big
banks have undue influence and will continue to do so. What a pity it
is that you have not been out on the road with an independent
financial adviser to find out what we do. You would have seen that we
spend 90 per cent of our time advising or doing admin and probably 10
per cent selling.
In fact, when I went to see a new company case yesterday, he
admonished me for not being “salesy” enough.
I shall be very pleased to hear what you have to say about these
comments, which I feel are relevant. I can only see that what you
have recommended will drive people into the hands of the banks and
that there will be less independent advice.
It also seems to me peculiar that IFAs will have to have a fee
agreement and then comply with it on a commission basis and yet
multi-ties will be allowed to draw commission in the ordinary way,
presumably even without full disclosure as we have now.
I might add that I have every intention, if I possibly can, of
remaining an indepen-dent financial adviser, as I bel-ieve very
strongly in the concept and, I am pleased to say, so do my clients or
I would not be acquiring new ones very rapidly.
B G W Jamieson
Jamieson Financial Management,
Bognor Regis, West Sussex