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Depolarisation edge: Gareth Marr

Independent advice is a product in itself that ought to be viewed as a stand-alone commodity. It is not a means to sell products to customers, it is advising them on everything that they need to organise their finances.

What is independent advice? One might
simply assume that independent advice is what IFAs deliver to
customers. That does not tell the whole story as IFAs have had to
sell products perhaps from a limited pool of a pre-selected provider
to earn remuneration for the time spent when a product sale is not

Independent advice is a product in itself that ought to be viewed as
a stand-alone commodity and has a value in its own right whether or
not a product is sold.

Independent advice is therefore not a means to sell products to
customers, it is advising them on everything they need to organise
their finances.

This is the message that must be communicated to consumers, the media, the Government
and the regulator if independent advice is to jump the credibility
hurdle it is facing.

All the interested parties believe that, to some degree, independent
advice has not given customers what they need. The good news is that
the new menu approach gives us a sound opportunity to make it very
clear that advice is different to flogging investment, protection and
pension products.

Over the next six months, companies giving advice will have the
chance to develop menus to differentiate the services they offer.

Within this framework, they can start to communicate to customers
from the outset that IFAs are closer to consumers than we are to
product manufacturers.

There is an urgent need to distance advice-givers from providers. For
too long, IFAs have been seen by some people as little more than
distributors of products.

The new regulations require firms to give two sets of documents to
customers in their initial contact. One concentrates on key facts
about the business and tells customers how the business is structured
and the services provided.

The second document focuses on the key facts about a firm’s charges
and both pieces of literature give the opportunity to make it clear
that if a firm gives advice it is independent advice and not the
“advice” necessary to sell a product. It is that independent advice
the customer is paying for.

Moving into the next phase of the advice market, many commentators
have predicted that independent advice will be the preserve of the
highnet-worth individual and not the mass market.

In this model, great numbers of previously independent firms turn
into multi-ties or sell up and go and work for one, allowing those
host companies to mop up the mass market (and those IFAs who have
gone over to multi-ties will doubtless do well and serve their
customers well).

But we know the FSA wants independent advice to be available to
customers across the marketplace and it is concerned to see how it
can be delivered broadly, given the time and costs of training and
retaining consultants.

Origen sees independent advice as deliverable and not just through
the traditional face-to-face methods. Advising customers at the
worksite using electronic platforms is one way that we are providing
independent advice to the mass market.

We also have partnerships with a number of media groups to offer
their readers pensions and annuity advice over the phone, including
the Telegraph, the Mirror and the Scotsman groups, and have found
that these services are very much needed.

For example, we recently received a letter from a Mirror reader who
had used our call centre, which ought to remind us all of the demand
and significance of getting independent advice to the mass market.
The writer was moved to write his letter expressing his gratitude to
a consultant who had displayed “grit and determination” in finding
him the very best annuity income with the proceeds of his modest
private pension.

Without the advice, his tax-free lump sum would have been just
10,000 compared with the 13,000 we secured and the
43 a week income he would have received became 62. To
some, the man concedes, it might not sound like a huge amount of
extra money but to him, it is enough to have a considerable impact on
his quality of life in retirement.

Those IFAs seeking to remain independent and who maintain that their
route to survival is about chasing the higher end of the market
should be wary.

To serve this market, you cannot be a threeman band – you must
separate research and investment management from advice. In 2005, we
expect to see fundamental changes to the market.

Gareth Marr is chief executive of Origen


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