Callum McCarthy, the Association of British Insurers and product providers want an end to the IFA. They do not want independent choice when it comes to product distribution.
Life offices want to buy distribution because they can oblige their tied salesforces to sell sub-standard products. This is historical fact and evidenced by almost all big tied salesforces and their available products. What they conveniently ignore is that they are incompetent and largely responsible for most of the evils that afflict our industry – misselling and expensive methods of distribution, to name but two.
Consider also that the IFA today sells 70 per cent of UK financial services and yet is responsible for only 3 per cent of Financial Ombudsman Service claims.
When life offices are in this position, they can then hide their distribution costs with other higher product charges. See how it all starts to work so well? This is what factory gate pricing is about.
Life offices and product providers must first emasculate the IFA and then do their dirty work. Providers need their mates at the ABI and FSA to force the issue and hide behind this. Have you noticed how quiet most providers have been with regard to the recent ABI statements on IFAs and commission?
The IFA needs to alert the consumer groups to this conspiracy because it is the consumer who is going to suffer. When they remove commission, the IFA will be obliged to negotiate fees with the client. The client can obtain fee-free terms direct from the life office. Each year, these fees will be disclosed to the client and this will include trail. The client will be invited to switch this trail back into their own product via the life office. At a stroke, the value of the IFA market goes down the drain.
Any IFA thinking of selling his business based on trail will need to think again. Already you can see that taking trail is an act of faith when it comes to future regulation. Maybe it is better to take high initial and waive trail just in case the regulators waive it for you.
The life offices have not learnt their lesson from the stakeholder debacle and for this to work they must kill independence and product choice in order that they can sell high-charged products and hide distribution costs.
Product charges in the long run have always been shown to be far higher when a life office attempts its own distribution.
We must alert consumer groups to this and maybe they will understand that the IFA is the solution and not the problem.
Temple Bar IFA