The loss of polarisation is not actually the enormous problem for the IFA that the financial institutions would like it to be. For the IFA who is providing a proper caring and ongoing service for clients, the loss of polarisation is a minor hindrance. But the commercial background is quite unpleasant. The solution is easily within the reach of IFAs but only if they are prepared to grasp it.
In the beginning, the Government created Fimbra, and the Fimbra logo rapidly bec ame recognised as the exclusive badge of the IFA and was much sought after by the buying public.
To the financial institutions, many of their products were highly profitable but they were of poor quality. The only way they could sell them was thr ough tied agents and direct salesforces. But the tied agents and direct salesforces were rapidly transferring to the IFA profession because they could not retain their clients.
For the institutions, the solution was simple. Their commercial power and financial ability to fund the regulatory system enabled them to lobby for change successfully.
Due to this and other minor reasons, Fimbra was scrapped and replaced with the Personal Investment Authority. The PIA would look after all sales routes, independent or otherwise and, at a stroke, the IFA lost his most obvious symbol of independent financial advice.
Unfortunately for the institutions, IFA Promotion had already taken up the crusade for independent advice and very successfully so, with its £ sign logo. In addition, the PIA surprised the institutions by insisting on maintaining polarisation.
The institutions sought another solution. The first step was to fund IFAP themselves. Once they had control, they set about burying it in obscurity. In recent years, I can count on one hand the referrals that we have had from IFAP.
The most recent manifestation of the institutions' commercial power is the abolition of the PIA in exchange for the Financial Services Authority and the scrapping of polari sation. The institutions have lobbied hard for this over a number of years. The laughable excuse presented to us from the FSA is that it is desirable for competition purposes. This is so unbelievably path etic that I am not even going to give it credibility by trying to argue the point.
The insurance companies need the elimination of, or at the very least, some reduction in, the effects of independent advice. But there is another, even more powerful, hand at the table. The Government has its own vested interests and it is not at all happy that IFAs refuse to sell its products unquestioningly.
Through the creation of a brand new tax on dividends, this Government pillaged every pension fund in the country within two months of being elected. Just for good measure, and even more revenue for the Treasury, it did the same to Peps and Tessas. Now it has the audacity to create a brand new pension product called stakeholder.
By comparison, this new pension scheme makes charging structures and the pension review scandal look like a teddy bears' picnic.
The minimum income guarantee simply means that nobody will get any additional pension benefit from their stakeholder scheme unless they contribute over a certain figure. Putting it another way, the stakeholder pension has the biggest initial charge you have ever seen.
The insurance institutions are offering to sell this new pension scheme for the Government through their direct salesforces. However, first, they need a little help with a small problem called polarisation.
The fact that the institutions have added their voice to that of the Government's on this matter should be of no great surprise. But they will not be able to marginalise the IFA on this occasion any more than they did with the Fimbra deb acle and IFAP. They have magnificently missed the point once again.
Certainly this little game will be an inconvenience to the IFA, but no more than that because :
1: Every time they add something to the pension pot, the client needs someone to explain it to them.
2: The IFA provides a quantifiable service that the client values, and will not relinquish.
3: Having taught the client the difference, he is not going to revert to direct sales and tied agents, even if they are multi-tied.
4: The IFA will find another logo, leading the client to their quality services.
The IFA will eventually have to rise to the challenge, and force the recreation of client best interests. The question is, are we ready to take control of this wretched industry? It is within our power to do so. We shall have to arm ourselves properly for the struggle and there are only two weapons that will be of effect – the control of money and the threat of collective disobedience.
Eventually, we will have to come together in one body on a very simple agenda. The most crucial element to this new IFA body is that we must pay our licensing fees and ICS levy through it. The body would then have our democratic power to withhold all payments and co-operation from the regulator on such key issues as polarisation.
Other key issues will need to be very simple, as well as fundamentally and exclu sively formed around the best interests of the client. Such a body will rapidly take over the leading role beyond any regulator.
Quite frankly, the regulator is already dead. It died with its own tortured attempts to str addle the commercial power of the institutions and the pure needs of clients' best interests.
We must move forward to take the lead role in client protection and professional res ponsibility. We will have the ear of the Government, we will become masters of our own destiny and we will be impervious to the jaundiced views of the institutions. All this can be achieved but only if our intentions are supremely in the best interests of our clients.
What about the people? They will love us for it.