View more on these topics

Ignoring the obvious

The Charles River report to the Association of British Insurers in 2005 found little criticism of the commission system of remuneration.
At about the same time as this report, I wrote to the FSA saying that if comm-ission and its effect were to be displayed on illustrations, why not also show the fee charges as an alternative to commission and its effect on long-term investment? After not getting a reply, I spoke to a senior FSA official who said it was a fair point and would be considered. Of course, nothing further was heard. We then had total confusion, with some illustrations showing commission as the cost of advice and some correctly saying that commission was for arranging the product.

The Treasury select committee put forward its negative opinion on commission and the ABI report was ignored. So now we get the RDR and the FSA have ignored the Charles River report and the only people who are able to meaningfully criticise the FSA are the Treasury select committee.

Lord Myners at the Treasury recently wrote back via my MP (when complaining about the increase in fees early this year) to say that the FSA was independent of the Treasury and set its own agenda and rules, which neatly absolves the Government, but who appoints the FSA officials?
Each arm of the Government has their own agenda and want to protect their own backs in the guise of protecting consumers and, when they are unsuccessful, even at doing that during the banking crisis, the answer is to increase their budget and empire, spend more of our money and make themselves even more unaccountable than they were before. Isn’t it amazing that the insurance and banking industry managed to make this country great under the Bank of England and Board of Trade super-vision long before the current regulatory system was thought of?
Since then, consistent interference, pension and endowment reviews (which meant that insurers were throwing compensation at people, whether deserved or not, when genuine loss had not been established and other policyholders were robbed in order to pay it) have become the norm and the savings gap has increased substantially.

The very small elite (in their eyes) who have the client bank wanting to pay fees cannot possibly close the savings gap – only sufficient sales of invest-ment products funded by commission will enable advisers to meet the marketing costs necessary to generate interest and encourage consumers to invest and to equip technical salespeople (which is what we are) to establish the need and then to find a suitable product to fill it. Why else is commission paid? If people were queuing up to buy invest-ment or protection prod-ucts, then life offices would have no need to remunerate intermediaries.

Why do these ivory tower dwellers ignore the obvious? If it’s not broke, why fiddle about making repairs? If we were recommending only deposits and National Savings and ignoring other asset-based investments on fees, the advice industry would be dead very soon – it is only by introducing the public to “risk” investments with the benefits and down-sides spelled out that the savings gap may be reduced.

New exams? Most of us have had to prove our competence each year and the quality of our advice is tested. It is impossible for even someone who takes periodic new exams to retain all the knowledge necessary for each eventuality that a client may throw at us but, without developing our people skills and ability to communicate at all levels with people, no one will choose us as their adviser.

The ability to find the facts for each new circumstance is far more important than being able to memorise one set of facts for an examiner which then may be forgotten or become irrelevant following a new Finance Act.

It is plainly nonsensical and outrageously ineq-uitable that we can work as IFAs for many years, having earned the respect of our clients, and be deemed competent until 2012 to offer advice, then to be suddenly deauthorised by regulators who have neither experience at running IFA businesses or apparently (according to the skills council) any mandatory qualifications.

Frank Dennis


Wilson steps down as chairman of Personal Touch

Personal Touch Financial Services chairman Martin Wilson has stepped down from the network. Wilson was suspended from PTFS in November pending an internal investigation, although at the time, nobody at the network would comm- ent on the details, saying it was “an internal matter”. Wilson says this has been resolved without any disciplinary issue and […]

IFAs used as ‘pawns’ in expat fraud

Five men have been jailed for an investment scam which defrauded 56 British expats of £1.93m. According to the Serious Fraud Office, it used overseas IFAs as “unwitting pawns” in the scheme.

How can I help develop my professional connections?

Graeme Ballantyne, business consultancy manager, looks at how you can maximise the opportunities through your professional connections As we move through the summer months it’s perhaps a good time to pause and reflect on whether the plans you’ve made for your business are bearing fruit. One area we at PruConsulting know many advisers have been […]


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. Could not agree with you more Frank. I would also go further. Cautious and even balanced under the regulators definitions (particularly fos) put these clients off limits for investments. Gilts and bonds can not possibly cover charges and commissions. Lots has been written about the ‘cautious’ fund another ifa just used and basically we are all in trouble with these types of fund. A genuine cautious fund just can’t cover everything in this environment and we all know it. So what does that leave us with? Telling a client he has to tick the box to say he is adventurous? Good luck! I will stay in the offshore market.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm