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Declining moment

Alan Lakey, my colleague here at Money Marketing, is an indefatigable researcher. Either that or it was a quick Google of my name that led him a few months ago to “out” me in this paper as a former trade union activist within the NHS.

Actually, I am very proud to have been a union activist. I learned an amazing amount. But probably the most important thing I learned is that while you can agree on many things, ultimately there will always be a dividing line between management and workers.

Which is how, to a large extent, I view the proposed union between Skandia and Aifa. Last week, Skandia announced that it was cancelling its membership of the ABI to join Aifa. Skandia chief executive Nick Poyntz-Wright told IFAs that Skandia has “little alignment of interests” with the rest of the ABI’s members.

Poyntz-Wright is quoted in Money Marketing as saying: “For some time now, we have viewed ourselves as different from more traditional life insurers. We believe passionately in the importance of quality advice to guide and support customers’ financial decisions. Unfortunately, fewer and fewer of our peers among the ABI membership share our focus on the advice sector. The time has come for us to step away.”

ABI director general Stephen Haddrill says he does not recognise Skandia’s description of its work. Aifa, meanwhile, is being cautiously positive about the move, not least because it sees the opportunity of grabbing a lump of dosh that Skandia will throw its way if allowed to join.

Let’s see where the land lies. First is Skandia’s argument that the ABI’s “assisted purchase” is detrimental not just to the concept of proper financial advice but also risks being detrimental to consumers.

In theory, all you are doing is allowing consumers to consult financial experts to check whether a product is appropriate for their needs before buying. But, in practice, as even the ABI’s research showed, two-thirds of customers who received “assisted purchase” ended up believing they had been “advised” before purchase.

In that sense, for Haddrill to say that the ABI makes “no apologies for standing up for consumers” in respect of assisted advice is a travesty of what the proposal will really mean.

There are undeniably other areas of the ABI’s proposals to the RDR that are pro-consumer and I have praised them for putting them forward but assisted advice is not one of them. The question that follows from Skandia’s objection to this proposal is that of whether it can reasonably remain a member of the ABI.

That is a matter for Skandia although it is worth noting that other supposedly pro-IFA life office members stand to gain nothing from assisted advice. Yet none of them has had the guts to say publicly that this part of the ABI’s proposals is rubbish. In that sense, Skandia is being brave – if slightly isolated – in deciding to leave.

The problem I have is with the view that Skandia is totally unlike other ABI members in terms of how it operates. The reality is that the ABI’s membership is made up of a wide range of businesses and business models. To say you cannot be a member of the ABI on the grounds of your proclaimed “uniqueness” is bizarre.

Even worse is the notion that you should not only leave the ABI but also join Aifa. The truth is that advisers are distinct from providers. They may recommend their products but, acting as agents of their clients, there will be times when they are – or at least should be – in conflict with providers.

This is not just abstract opinion on my part. Almost every week, Money Marketing carries stories in which an IFA fulminates against a provider over something that company has done or failed to do.

Now, some might argue that there will be times when managers are part of the same union as their workers. That was certainly the case in my own trade union, where senior nursing officers, who managed the work of several hundred nurses at a time, also belonged to my union.

But the fact was that they did not carry such a massively disproportionate weight inside the union in terms of size or their financial contribution. Assuming they even bothered to attend meetings, their views counted no more than those of any other member, usually a lot less.

Yet in the case of Skandia, its presence in any Aifa gathering would be like the fat kid in the classroom wanting to be liked because he has more sweets than anyone else. And what if, God forbid, more life offices decide they want to join Skandia? Would they also be allowed to join Aifa? It would be better if Skandia were to reconsider its wish to join Aifa. But if it does not, Aifa should politely decline.

For consumers to trust IFAs and their representatives, they need to know that the latter are not cuddling up in bed with providers. If this application is accepted, that is precisely the message that they will be given.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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