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IFA View: Fools rush in

IFAs can make a living in this business by doing the right thing for rich and poor

Well, here they once again. They have probably overspent, definitely overindulged and face the prospect of yet another year of effort, pain and stoicism. Another 12 months of ups, downs, surprises and shocks – and that is just Gordon Brown and David Cameron.

Reflecting on 2005 has been done to death but if you are an IFA, then there is only one reflection necessary which is captured in a tune you should be humming as 2006 starts in earnest – Won’t Get Fooled Again by The Who.

Last year, the Chancellor, the FSA and, worst of all, our industry surely plumbed new depths of mishandling and underperformance.

Let me start with dear old Gordon. We should have learnt with his early proposals on Peps (remember the 50,000 lifetime limit) and lifetime individual savings accounts that Gordon has a thing about caps. It is almost as though he wants to impose equality by trimming off the profits of the most wealthy as if they were sprouting from a conifer hedge.

His frustration is crystal clear. The leaks, dismissals and then blinding U-turn on Turner and pension simplification will take some beating and whether or not he took the right course in the end, the manner of his navigation was frankly reckless and smacked of hubris and contempt.

As for the FSA, it reminded me a little of Brian Clough in that piece of footage when several fans had invaded the pitch and he was buzzing around cuffing anyone he could reach with indiscrim- inate petulance. Last year struck me as year when the FSA made excuses for people who should have been dangling by their heels and came down far too tough on all the wrong people in all the wrong areas.

What of our industry? Well, we had the marriage between the public school Lady Toff that was Sofa and the grammar school boy done good in the shape of the LIA. Can such a marriage last or will one ultimately betray their class and their heritage for an easy life? We will need to wait and see.

Far more infuriating for me was our collective failure to meaningfully engage on the great opportunities that were the Turner report and A-Day pension simplifi-cation. As an industry, we wasted hours, nay days, thinking how to preserve the wealth of the fortunate rather than using A-Day to really address the needs of the poorest. Once again, we were obsessed with tax breaks rather than investment rigour.

How many IFAs had fine wines and Bulgarian chalets in their recommendation reports before? Suddenly, as A-Day beckoned, everyone was looking for second homes, stamp collections, Yachts and clients with 1.5m in their pension funds to “protect” them from paying tax that might just help the poor get an affordable state pension.

The result was that we had all the wrong debates in public and betrayed ourselves as overpaid lackies for the wealthiest in society, with no real interest in the poorest whatsoever.

Perhaps if we had shown our concern about A-Day and Turner operating in total separation, shouted for a review of final-salary scheme controls to encourage employers to embrace them again and presented arguments for compulsion or even if we had worked with the Government to get a meaningful agenda for pensions set out it might have been different.

No, we shouted about preserving EPPs, the earnings opportunities for switching big funds, monopoly Sipps, crackpot schemes with tax breaks for saving IHT and I suspect that eventually Gordon just lost patience.

So, what next for 2006? Well, the Government still believes that pricing is everything and distribution will always look after itself. It thought stakeholders would be bought. The same was true with the child trust fund and it will probably be the same again with the Brit Saver or whatever the new funded state pension will be christened.

I ask all IFAs not to get caught again. You can make a living in this business and help everyone by doing the right thing for rich and poor. Do not think just about 2006 but about 2016, 2026 and 2060. We may just find we recapture respect, wrest back the initiative for financial services policy and discover that we all have an important role to play – either for Brown or Cameron.


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