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Impact points

Whenever I have an argument with someone, I always end up, many hours later, thinking of something else I should have said at the time. It’s known as the “and another thing syndrome”.

In my case, it does not just happen after an argument but, sadly, after writing an article or a comment piece, occasionally in Money Marketing too. In this instance, however, it is not always me who thinks of the better riposte but IFAs who email me.

Last week’s comment, in which I discussed the prospect of dual mortgage pricing driving brokers out of the market, was a classic case in point. Perhaps not surprisingly, it led to emails from advisers, several of them keen to tell me about their experience of having to tell a prospective client that they can’t help him.

One IFA wrote: “I recently had to tell one of my clients that I was unable to arrange a £250,000 mortgage for him on a loan to value of just 20 per cent. The reason being that I knew HSBC could offer a far better deal than I would ever have been able to source.

“From my perspective, I could have charged him a fee and done all the paper-work but it would not make sense to do that. My concern is that if he starts to think that he can get a better deal when it comes to mortgages, he might make the same assumption about investments or pension planning.”

Another IFA took the matter to another level: “RDR will effectively price out the majority of IFAs from the financial advice market just as surely as dual pricing has done so for mortgage advisers.

“I fear that if RDR is allowed to continue in its present form, IFAs will be a thing of the past within five years. Ten years after that, the British taxpayer will be bailing out the pensions, life and savings industry. Having read your columns which have been largely supportive of RDR, does this mean that you are revising your opinion on the subject?”

Er, no is the answer. My verdict on the RDR is that it offered a huge amount of promise in its initial stages, still does have some positive features to it but those factors are unlikely, in and of themselves, to make anything like as big an impact on the future of the IFA community – or on that of consumers – as the FSA itself believes or as many advisers fear.

Indeed, I have been encouraged in that view by a former regulator, who recently wrote to me about the RDR, saying: “This is another grandiose announcement and it is debatable whether the new adviser charges system will really empower consumers in the way the FSA thinks it might.

“The FSA really ought to wait and see what the EU does with its own review on packaged investments before it goes ahead with changes. It is going to create a real mess if the EU comes up with something different in a year or two.”

But it was another IFA who made a point I had not even considered – what happens with respect to other financial products? My correspondent says: “I have recently arranged life cover for a young couple who arranged their mortgage directly through a lender but were not ‘sold’ – or indeed advised on – life cover or income protection.

“I appreciate many people will get their ‘advice’ from their friendly neighbourhood supermarket – Tesco/Asda – who as I understand it do not ‘advise’. So how many people in five or 10 years’ time will have mortgages (either first-timers or house movers) and no life insurance or income protection or MPPI because the mortgage lender didn’t recommend it and because the borrower didn’t want to increase their outgoings by buying what might be seen as an optional policy from Asda.

“I have a few clients who ‘bought’ life insurance or pen-sions either directly or when they were approached in a bank branch, who have plans without waiver of premium cover. I also have a client with MS who has had his endowment premiums paid by the insurer for the last five years because an IFA arranged the policy with waiver (as he also did with a pension policy), a total expense for Axa of £5,500. I suspect that the reason why a bank salesman would sell a pension/life policy without waiver is because it would delay the setting up of the plan and the payment of commission.”

This writer has a point. Interestingly, when I contacted First Direct about a mortgage I was asked about protection. I explained that I already had life cover – a policy arranged through my IFA several years ago. There was no pressure on me to take out any form of insurance apart from build-ings cover. If so, the problem of banks misselling products to customers will never apply, purely because their sales staff are too inept to bother. Weird world, isn’t it?

Nic Cicutti can be contacted at



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