Handbags – just why do they cost into the thousands? Is the level of workmanship on a par with a Howson or a Vettriano? No, it is not, yet they sell in good volume. The label is the driver and that is a message we need to recognise as, at the moment, the proposed market structure is unclear and, in some cases, inoperable.
Segmentation is a much used term that is generally accepted as being central to any business of transition and yet the regulators and others have so far failed to achieve an effective split when coming up with labels that provide clear points of differentiation and make it obvious to the general public exactly what is being offered and what they should expect to be delivered.
The introduction of the term “restricted advice” has polarised opinion. On the one hand, we have the banks stating that the label is pejorative and might, in fact, deter consumers.
I believe that those seeking the term “advice” or “adviser” need to make sure that is the core of the proposition, whether it is restricted or not. The general public deserves labels that mean something.
This whole question of labels has always been a problem.
I remember going back to my days as a life assurance inspector that many people were uncomfortable when the label “inspector” was replaced by “sales consultant”. They felt this was demeaning and took away from their professionalism or certainly their concept of professionalism.
However, you had to agree that it described what we were actually doing. We were selling products for a wholesaler to intermediaries for them to then sell on to the public.
Prior to 1988, people did not necessarily deliver advice in an identifiable format, many people did not even write to people to tell them what they had actually set up as the bulk of the activity was often verbal.
This obviously left firms open to challenge but, given that there was no effective means of making complaints in those days, that was not really seen as much of a commercial barrier.
What could we actually arrive at in the way of reasonable titles?
One fact we need to accept is that any title is defined not by ourselves, not by regulators and not by anybody else, but by the public.
If you are telling somebody what to do or you are recommending something, then, in my eyes, you are giving advice and, at best, it is tactical.
Where someone is simply selling suitability, it is, at best, random.
It is quite clear that the banks are concerned that IFAs are about to be given yet another advantage over them when defining the services they provide. It is therefore more likely that they will opt for some kind of reduced level of advice.
My best guess is that they are more likely to head for the guidance area than restricted advice. Indeed, restricted advice could be for many people a label which is simply of no interest or of no direct appeal, if nothing else, this will be difficult one to market to the general public.
If we don’t accept the real labels, it will be handbags at 30 paces.
Rob Reid is managing director of Syndaxi Chartered Financial Planners