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Garry Heath: Why adviser trade bodies still matter

Nic Cicutti’s recent article in Money Marketing saw him launch attacks on Libertatem and Pimfa.  But is he right – or is it more personal than that?

Generally, I avoid reading Nic Cicutti’s contributions. I have low blood pressure and I like to keep it that way. But last week, he embarked on a personal attack on me and my organisation, Libertatem, so I thought it prudent to respond.

Firstly, I would like to lay down some background on my relationship with Mr Cicutti.

Nic and I go back a long way. Although we haven’t met in years, we have had many a beer in the past and he was certainly a supporter of my efforts back in the early days of the IFA Association. Indeed, he even contributed articles to a magazine produced by the Association.

The decision to drop him came back to haunt me personally when I launched Libertatem.  The organisation came about because there was a general feeling amongst the adviser community that their needs were not being met by Apfa, which was being driven by large networks with strong links to the regulator.

Nearly 50 per cent of the adviser community claimed they would join me, yet Nic immediately dismissed my efforts as being that of a “tribute band, attempting to bring back the past”.  He has been on my case pretty much ever since.

I have nothing against him personally. But he has the same mind set as most metropolitan progressives. He does not believe that any commercial activity can be moral or trusted, and must be conducted under the watchful eye of a huge phalanx of regulators. In this he reflects the views of our political and regulatory elite in general, and the Financial Ombudsman Service in particular.

Nic Cicutti: Adviser trade bodies are risking irrelevancy

He may have a point about the large institutions, but they have both the lobbying power to mitigate and the staff to handle the regulatory pressures. Across Europe the banks and insurance companies spend €300m (£261) on lobbying every year. European advisers are hard pressed to raise €2m.

The reason for this is simple: despite being in one of the most politicised and regulated occupations in Europe, advice firms generally avoid joining trade associations.

In the UK, 80 per cent of firms don’t contribute and, more importantly, never have. Over the years I have heard all of the excuses, from being over-complicated to having too many options and not knowing which one to side with (there were five trade associations in existence when I started with NFIFA in 1989, all of which represented advisers as a minority interest).  The reasons not to join seemed to outweigh all other options.

Our solution was to create an adviser-only body. We then set about merging with and taking over all of the other associations until there was only one choice. But now the excuse was that there was no choice.

Today, of course, advisers have a choice of two: Libertatem or Pimfa, both of which Nic has just dismissed as being irrelevant.

I’m not sure what research Nic carried out in coming to this damning conclusion.  He certainly never spoke to us.  Had he picked up the phone I would happily have informed him that we have been co-ordinating the activity around the Connaught fund, which is the best example yet of regulatory inaction and an Ombudsman determined to dump responsibility on advisers rather than those responsible for running the fund.

Our efforts have already seen Capita return 100 per cent of the capital invested in the fund to investors which has saved each and every adviser £4,500 simply because it hasn’t been taken out of the bottomless pot that is the Financial Services Compensation Scheme.  We are now concentrating on trying to return those advisers affected to their original position as well.

Meanwhile, in our Financial Advice Market Review discussions with the FCA, Libertatem focused on regulatory and FSCS costs. The UK professional advice sector represents only 1.1 in 1,000 of FOS’s cases and yet each of those cases shares over £76,000 of regulatory fees – a huge cost for a very small problem. Advisers are also exposed to a potential £400m each year from their share of their two FSCS pots.

As a result of lobbying by both Libertatem and Pimfa, 25 per cent of that cost will now be funded by the providers – a potential saving of £100m a year.

And then there is The Heath Report 3.  Nic describes it as “a report that nobody cares about”.  And yet the industry response to it has been very positive, the underlying trends have been picked up on and a number of industry leaders have requested meetings to discuss further. Put simply, Nic is wrong.

In a Trump era where fake news is in itself a headline, to have lazy journalists asserting their views without even picking up the phone to verify their position is dangerous. To simply dismiss two trade associations as being irrelevant because they don’t fit into his view of the financial world simply isn’t good enough.

Libertatem and Pimfa exist to make the world a better place for those they represent. Without us, the regulators can do what they want, which appears to be fast tracking the demise of the impartial advice sector.

Nic closes his article by asserting that Pimfa is doomed to become as irrelevant tomorrow as I am today. He may well be right.  With 80 per cent of the adviser community happy to freeload on Libertatem’s and Pimfa’s membership, it will always be an uphill struggle.  We estimate that £3m is required per annum to cover all bases. At present, we believe that between us, we are raising less than a third of that figure through membership and sponsorship.  With Pimfa’s loyalties split between advisers and wealth managers, even less of that figure is going towards fighting the IFAs’s corner.

So should we just pack up our files and go home? At my age, and having done it all before, it certainly makes sense. But with a vibrant and passionate membership behind me, and no successor in the wings to carry on the work, it’s simply not an option.

I would suggest that perhaps it is Nic Cicutti that needs a cause to believe in and fight for. Constructive criticism is welcome so why not delve deeper into the underlying problems of the regulatory system, the sector and the trade associations? Because if he is right, and the industry has indeed passed us all by, then he may well find himself with nothing left to report on.

Garry Heath is director general at Libertatem

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. I found Nic Cicutti’s comments about Garry Heath dismissive and disrespectful. I have never met Garry but I have just read the Heath Report 3 and felt the survey was comprehensive and the results a fair analysis of the adviser market. It identified a trend for a further reduction in adviser numbers and the number of clients they service. It also highlighted rising regulatory costs and on page 36 & 37 there was a damning indictment from a PI broker of the FOS and FCA which threatens the sustainability of the PI insurance market. Instead of concluding Heath is irrelevant Cicutti would have more credibility if he actually took him to task on the content of what he is saying and explained why he thought he is wrong.

  2. The litmus test of the validity of any trade body is the extent to which the powers that be take notice of and, more importantly, act on whatever proposals and representations it puts forward.

    A trade body that can prove a number of successes in this area is valid. Those that cannot are not.

  3. Trevor Harrington 22nd February 2019 at 11:48 am

    You would think that a profession such as ours, with such obvious universal compatibility of purposes and functions could easily link and form a united front for our own self preservation.

    I am afraid this is not so. Too many IFAs put their own self-interest well in front of any statesmanlike objectives concerning the entire profession and the benefit to clients.

    As a founder member of Gill Cardy’s IFA Center, I was optimistic that we could formulate a united front on some of the simpler issues of the day, which at that time were imminently affecting our profession.

    I was of course massively disappointed. They could not even agree that IFAs of many years experience should not be forced to take their exams all over again, in many instances for the second or third time in two decades, let alone face up to the regulators inability to curtail the activities of obvious miscreants within our ranks before they became a national crises and ultimate disgrace, funded by all of us.

    Why ? I can only surmise that those with the new exam levels already relished the idea that our profession would be reduced in size with the resultant excellent “business pickings” for themselves, and most were reluctant to invoke the possibility of a vindictive regulator looking at their own businesses in particular.

    I have tried to participate in the two trade bodies to which Garry relates, and I must say that I find their objectives far too obscure and completely lacking in any radical thinking. Indeed, as Mr Cicutti would say – “irrelevant”.

    Perhaps this flim-flam attitude to regulation and our regulators is in the mistaken belief that not being too radical will increase their membership.

    Not so – as I am sure Garry will tell you, in membership numbers, all that happens is that a small number of businesses join on the basis that they think it is their duty to do so, most of the rest cannot be bothered and do not want the expense, whilst the ones who really want to do something about the inequalities of our profession and our regulator see it as a total waste of money, and more importantly a total waste of time.

    I think, if Garry wants to make his organisation more relevant, then a considerably more radical approach is required.

    • As not a few people have opined, trying to get the IFA community to unite behind a single agenda is a bit like trying to herd cats. That said, one would reasonably think there would be a core agenda behind which most could unite. And it’s not as if Libertatem’s subscription fee is particularly large, quite the opposite in fact.

      But all too many firms just can’t be bothered or, in the wake of APFA’s failure to win any meaningful concessions, or at least none of notable significance relative to what APFA itself cost, don’t think the FCA will ever really take a scrap of notice of anything that any outside body has to say. Given its freedom to wave two fingers even at the TSC, who can blame them? Most just think: Oh well, we are where we are, it’s the way of today’s world, there’s nothing to be done about it and I’m counting down the days to when I can sell up and get the hell out. Why bother paying to support a trade body unlikely to achieve anything of any meaningful value within the remainder of my working lifetime?

      • Trevor Harrington 22nd February 2019 at 2:36 pm

        Indeed Julian … I note the apathy and cynicism in our profession which you describe.

        At the risk of broadening the discussion … it is an all too sad depiction of the voting masses in the entire western World as we know it today. You could call it a complete lack of wisdom, which probably only resides with the populous as they get older.

        People only vote for that party or political agenda which they think suits their own microscopic and selfish personal benefit the most, rather than the statesmanlike global picture.

        The result being that, in common with all of the major global economies, we have huge national debts which are unsustainable, and all because people voted for their own personal benefit, such as higher wages. Indeed, most of the money that the profligate Blair / Brown government ploughed into the public sector, simply went in higher wages.

        As far as our own profession is concerned, we are where we are, simply because the majority of practitioners have failed to view the big picture and get excited about it, rather than their own selfish self interests.

        Where Garry can be commended, is that at least he is trying, and apparently he has not given up on the circumstances under which we all reside.
        It is not a function which I would want personally, but if he would get angry, and be a whole lot more radical, I for one would be a trouper for him.
        As I said previously, I did try with IFA Centre and Gill Cardy … and as it rapidly became apparent, it was a total waste of time.

  4. Some people might question whether they should join a trade association that has the following on its website under Forthcoming Events:
    “Libertatem’s next road show will take place in London in a few weeks where it is hoped that TSC Chairman Andrew Tyrie will be speaking.”

  5. I personally think that now we have mandatory membership of the PFS or alternative professional body, there is an expectation that they should be fighting our corner on key issues, without the need for paying additional subscriptions for Pimfa, Libertatem etc. I’ve taken the PFS to task on this point as, whether they do fight for us or not, it doesn’t seem visible to the membership. Instead what we get are new qualifications, naval gazing questionnaires and restructuring, new offices,
    and poor service. My firms Chartered status renewal has just taken over a month, taking us two weeks beyond our renewal date!

    There are desperate issues where we need a centralised lobby e.g the broken PI market, and also the complete car crash that is the FCAs Triage definition essentially creating a two tier definition of advice and creating liability within IFA practices should you simply have a conversation with a prospective client including any personal details.

  6. Christopher Petrie 25th February 2019 at 7:19 am

    Most IFA firms are doing perfectly well.

    RDR turned out to be a friend of the IFA and an enemy of the banks…exactly as some of us predicted. And the opposite of what Mr Heath told us would happen.

    Advisor numbers are growing every year. Profitability in the sector is up. Client demand currently outstrips supply.

    The reason I haven’t joined Mr Heath”s trade body isn’t just because of its ridiculous name. It’s because I simply don’t agree with its Back To The Future ambitions.

    • I’ve read elsewhere, in more than one place, that the number of advisers leaving the profession is greater than the number joining, largely as a result of relentless regulatory attrition

  7. Christopher Petrie 25th February 2019 at 1:37 pm

    You’re reading things wrongly then.

    Please send a link to what you’ve read as it won’t be correct.

  8. As I have commented before: I have never understood why the adviser community thinks that they need a professional body AND a trade body. All other professions seem to have one – a professional body, that covers both functions. Solicitors, accountants, architects engineers etc.

    It rather seems to me (with no disrespect intended to Gary Heath)that trade bodies matter more to those that run them than to those that the purport to represent.

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