The Liberal Democrats' suggestion that the Government and product providers should shoulder the cost of independent financial advice is, as Paul Smee said, “a very interesting concept” – but I would argue only in part.
Product providers did, and still do to a large extent, bear the cost by way of commission – although this is being eroded due to over-reaction by the Government to the highly effective, if somewhat misguided, anti-commission lobby by certain groups.
We all know there are a few “bad apples” in the IFA cart but the regulatory environment today and disclosure make it far more difficult for them to continue their bad practice.
Commission serves a purpose and clients, if given the choice of paying an up-front fee (plus VAT) or having the cost of advice covered by commission, will invariably opt for the latter. The issue for the client is not the method of adviser remuneration but the amount of said remuneration in relation to the quality of advice they have received.
Having the Government make a contribution to the cost of advice is a new concept, but not a road I would like to go down. A nationalised IFA industry!
The detail, as Mr Smee said, does indeed need some working out. It is clearly apparent that most individuals in Government know very little about our business as it is, so how can they be expected to determine what would be a fair price for our services?
To think that we would have carte blanche over fees would be ludicrous in the extreme. And if there were to be control over pricing surely there would also be control over how our businesses are run?
Most politicians and civil servants would not know how to run a piss-up in the proverbial, never mind having ever been involved in running a business. What sort of chaos would they bring to ours?
An alternative could be a voucher system where everyone gets x credits per year for financial advice. There are a number of problems with this:
it would not solve the problem of bad advice
it would have no effect on consumer ignorance about independent advice and
if the amount of benefit were realistic it would more than likely be means tested.
The cost of advice varies depending on where you live, therefore a flat rate would discriminate against those in cities and the South East. I am sure you can add many more.
I therefore have a small suggestion to make to the Government, political parties, lobbyists et al. Instead of trying to run our businesses for us, why not use your time and resources to far greater effect by educating the consumer about what good advice should entail and how to find it?
Consumers can then make up their own minds if they are getting value for money or not. Keeping up to date with financial products to a standard sufficient to make informed purchasing decisions is a full-time job, as around 27,000 of us in the UK know only too well.
In the interim, while outside forces try to dictate our future by coming up with one potty idea after another, I suggest we keep focused on what is after all (as most of you know) most important to our future success – the service we deliver to our clients.
In times of uncertainty – and we have had plenty to be uncertain about recently – it is all too easy to drift away from the fundamentals and be caught up in the madness of the moment.
Clients come first and foremost. It is imperative never to lose sight of what their needs and concerns are. Only then can you deliver first-rate adv-ice and guarantee they will come back for more – and never quibble about the cost.
Not only that, no doubt their friends and family will come flocking to you too, ensuring that whatever legislative changes or price controls are imposed will have very little impact on the future sustainability of your business.
Perhaps those charged with determining our destiny should pay a visit to our offices, they could have a very pleasant surprise.
Donna Bradshaw is communications director at Fiona Price & Partners