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Consumer confidence is key

In two weeks time, Aifa and every other body under the sun will be sending in their first responses to the Sandler consultation document.

Two more weeks of polishing the draft, adding that extra quote about the merits of advice, especially independent advice, turning up that decisive statistic… then what?

I deliberately referred to the first response. In two months over the summer it has not been possible to do justice to the all encompassing consultation process which almost asks the financial services industry to justify its existence from the year dot.

We expect and request that the Sandler team keep up its dialogue and receptiveness to fresh information until July next year, which is when we expect the final report to emerge. We certainly will be keeping up our comments over that year.

But let us fast forward – what do we want to see next year? What is a good outcome for the IFA community?

First, would it not be nice to read a chapter entitled, The Value of Advice? We have seen plenty of reports about the cost of advice. We have seen plenty of attempts to get round the need for advice, from comparative tables to decision trees.

Of course, all these developments have a place and I am not belittling them. But consumers have remained resolutely off-message. They seem to prefer, at least for the moment, advice to non-advice, human advice to screen-based advice.

It has something to do with confidence. It has something to do with trust – a word used by many IFAs when I canvassed them about what they felt their clients took from their relationship.

Could the Sandler report explore why this happens? Aifa&#39s submission will certainly stray into this territory.

The question of the value of advice will, of course, come into Sandler&#39s look at commission and its justification.

As I have said before in this column, IFAs should be up front in justifying to their clients the commission which they receive in terms of the service which they provide. If they are, the precise mechanism for remunerating that advice becomes a second-order question.

Second, where change is recommended (and we must expect such recommendations), I hope that this report will cover means and steps towards any ultimate goal, not just the goals themselves.

Too often, reports set ambitious goals but give no indication of how to get from where we are to the promised land. Let us look for more evidence of a worked-out plan in the Sandler process.

Third, the team should set explicit goals against which they should be measured. Are they aiming for a higher savings ratio? A perfectly competitive market? A market where no consumer ever loses out?

This should be explicit so we all can judge if their proposals help attain their goals. And they should confirm that they understand there to be pay-offs between different objectives.

They should not be so focused on one goal that they might miss unintended consequences elsewhere. They are investigating a complex market-place and recommendations in one area will have repercussions elsewhere.

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