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In the shade

Whenever I meet IFAs, after the initial pleasantries, I almost always find myself having to defend the views expressed in this column. The general consensus seems to be that I am unduly negative about IFAs and the good work that they do.

The problem is that, all too often, IFAs tend to place themselves in situations where the opinions they express and the way they do so tends to encourage the kind of negative interpretations that they dislike so much.

In fairness, sometimes it is not entirely their fault. Let me give you an example. Last week, browsing through Money Marketing, I happened across a news story in which it was reported that “nearly nine out of 10 IFAs think the burden of regulation is a threat to the future of the IFA industry.”

Taken at face value, this is the kind of story that makes almost any journalist or consumer campaigner groan.

What it implies to the rest of us is that those polled have no grasp of or refuse to acknowledge the fact that regulation is there for a reason, usually to do with a failure of the industry to keep its own house in order.

It also suggests that most interviewees are unable to appreciate how an ethically and morally aware industry that bids good riddance to the bad apples is the best long-term guarantee of IFAs’ futures.

That was my first reaction when reading the story based on research by Aegon into IFA attitudes so I decided to go back to the source and check out what IFAs had said.

It turns out that the survey results, and the opinions expressed by IFAs, are more nuanced than the story might have suggested at first glance.

For example, when asked how important did IFAs think the following factors have been in contributing to the savings gap – lack of education and understanding of individual financial needs was rated either as very important by almost two-thirds of advisers and “very” or “somewhat” important by 94 per cent.

The notion that misselling scandals have led to a loss of confidence was rated as important by nine out 10, with 53 per cent seeing it as very important.

There were other factors, too, that were considered critical factors. I am simply singling out two that I found interesting. Similarly, when asked how people might be encouraged to seek financial advice, 63 per cent of IFAs said it was very important for there to be a “greater understanding of the professional status of IFAs” while 23 per cent regarded it as “somewhat important”, a total of 90 per cent.

In this section, a near majority of advisers believed it was “very important” for – unspecified – measures to be taken to “rebuild trust in the industry while one in three thought it was “somewhat important”, a total of 89 per cent.

Clearly, there is some way to go. Most IFAs seem to believe that the issue is more to do with the outside world (better financial education in schools), than sorting themselves out (having a recognised “kitemark” based on a professional qualification).

Now we come to the vexed question of regulation. In this question, IFAs were asked which problems they regarded as posing a serious or potential threat to the future of their industry: burdensome regulation, recruiting the right calibre of people to the industry, lack of public trust, a perception that consumers can find the best deals for themselves without help, the increasing availability of financial information on the internet and the industry’s technological backwardness.

Here, it is true that almost nine out of 10 found regulation to be a “serious” or potential threat but 79 per cent also identified a failure to recruit the right calibre of people and 72 per cent said lack of public trust in the industry was also to blame.

The conclusion I draw from this survey is that, generally, there is much more light and shade in the way IFAs think than the black and white picture sometimes given. Of course, I could be wrong. For instance, an adviser may cite “lack of public trust” as a serious problem and, as often happens, then blame that problem on the media. Somehow, I do not believe most of those polled here meant it quite that way.

But even if many did, there would remain a large minority – at the very least – who are starting to shoulder some collective responsibility for the wrongs of the past. In a few cases, they are trying to put them right.

For them, the FSA’s deci-sion to end the prescriptive rules and approaches to regulation will be a god-send. It will allow them to flourish and use their own initiative to provide good outcomes for their clients. Others will get there, too, but make painful mistakes along the way.

There will, however, be a minority of advisers for whom regulation, no matter what sort it is, will always be “burdensome” or a “threat” to themselves and the industry as a whole. For them, I regret to say, there is only one direction to head – out and as soon as possible. Those who remain will be better off because of it.


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