I was astounded to read that the FSA has deemed it their right to take away from members of the public how their advisers should be remunerated.
I am equally astonished that the so-called Association of Independent Financial Advisers is backing this arrangement by setting up courses to explain to IFAs how they can persuade their clients who have never paid them a fee to start paying them a fee.
To me, it is beyond belief that an organisation such as the FSA has the power to take away from the public their right to decide how they want their financial adviser to be remunerated.
The whole exercise will create a two-tier society as far as financial awareness is concerned – those who have the money and those who don’t.
I was in print a few years ago with regards to Isas and how we can expect a member of the public to pay £200 or £300 to a financial adviser to set up a monthly Isa investment or indeed a single contribution when we the IFA receive 3 per cent of the initial contribution and 0.5 per cent a year of the value of the fund.
Our organisation offers our clients an ongoing monitoring service regarding the funds within the various portfolios.
We are acting for clients who go back over 30 years. We have three generations of clients and the business has been built up purely on giving good honest advice backed by an efficiently run organisation.
We have clients with seven-figure portfolios who have declined suggestions put to them some time ago regarding going fee-based. They were quite happy and content with the direct remuneration arrangement.
It is quite clear to most decent, upstanding IFAs what will happen. The wealthy people who appreciate and understand the benefits of independent advice may be persuaded to take the fee-paying route but it is likely that there will be insufficient numbers of such people to allow the current number of IFAs to survive. Is that the hidden intention?
Those of us who have been in the industry for any reasonable period of time know that the majority of the problems of our industry are generated from direct salesforces generally situated behind desks in banks, building societies and estate agents.
They will, of course, be rubbing their hands together as they will be able to operate on a reduced remuneration/fee-paying basis. There will be no long-term individual care as possibly in the course of four or five years they will deal with a number of different people who will all be looking to achieve targets.
If the FSA uncovers any improper activities, they will no doubt impose fines on such organisations of £1m or more but that will be less than a drop in the ocean for the mega-banks who will just smile and pay up, rubbing their hands gleefully at the profits they have already made, which any decent person reading this letter would agree is bizarre as there is only one reason why such organisations make such big profits.
Finally, the FSA does not seem to understand that organisations such as my own have built up a business over nearly 40 years. It also happens to be our pension and a lot of its value is based on fund-related remuneration. I am still at a loss as to why our regulators considered that this matter even needs considering.
I would suggest to all fellow IFAs that they do what I am doing and that is writing to all my clients advising them of what the FSA is suggesting and that it would be worthwhile them writing to the FSA telling them that they do not wish to pay fees. It would either be by fax, letter or email or indeed all three.
I am sure there are a number of IFA companies similar to our own that have over the years built up a respectable fund-based remuneration, which is in effect their pension fund. Fund-based remuneration cannot be built up to any form of a reasonable size unless you are treating your clients fairly.
Heather Moor & Edgecomb