The new proposals for Sandler products and their sales systems looks like another set-back for IFAs as, initially, the preferred sales system is to be guided self-help rather than advice.
Now we will have to wait for the autumn to see if the 1 per cent charging cap will be increased so that advice might become a more viable option, at least.
Whatever the outcome, we have to make it work and ensure we can still earn a proper return for providing what the majority of the public needs – whatever the regulator may think- advice.
The “simple” product range for low and middle-income earners is to be welcomed if it can help to restore investors' faith. If we have learned anything at all in the last decade, it must be that the future lies with clear, transparent plans that do exactly what they say on the tin.
So, in all likelihood, we will be faced with the challenge of selling products that will still be pretty complicated to a public that is not yet educated in finance and is still very dubious of the claims of our industry.
The high-net-worth market will be more fee-based (but by no means wholly) while the middle and lower-income markets will generally not tolerate fees. Yet we cannot afford to abandon the middle-income market, it is too big.
If the IFA profession is famed for its adaptability, then it must again, evolve. It will be a huge disappointment in October if the 1 per cent cap is not raised to some extent, and this should allow product providers to provide an increase in commission levels, particularly for regular premiums.
But we are most unlikely to see a return to pre-stakeholder commission rates so we will have to provide advice and make a profit from lower income levels. If this is the case, then we will have to change our sales and administration systems to become more efficient.
On the sales front, we may really have to question whether providing advice has to be a face-to-face process.
The cost of sending IFAs out in cars to visit people in their homes is hugely expensive and inefficient and may have seriously to be reconsidered for the middle-income market.
When we first established our annuity desk, I would not have believed that a telephone service could produce sales volumes to equal our face-to-face teams but that has been the case for the last four years. The annuity desk has a lower level of earnings per client but it deals with a much higher volume of clients per day.
Marketing campaigns to reach the public run hand in hand with telephone support desks. The internet may have been a slow starter in the IFA market but its day is coming.
People will still need advice but the internet can be coupled with phone helplines.
Ah, you are thinking, we have heard all of this before. But now it really is being introduced by a number of companies.
Wentworth Rose, in conjunction with Aegon, has just launched a worksite intranet service for big employers to give information over the net and advice over the telephone.
By the end of this year, we will have over half a million people seeing the site directly, via the PC on their office desk. How long would it have taken to reach the same audience by any conventional means? The unit cost of advice can be greatly reduced and even low-earning plans become profitable.
Finally, the industry must now move to electronic business submission and commission settlement. What was once a desirable concept is now an absolute necessity.
The most promising route to achieve this is through back-off-ice systems rather than directly between IFAs and product providers.
Individual IFA firms simply do not have the resources to develop EDI whereas systems' providers do. Wraps can also play a part but they should be integrated with the back-office systems and not stand-alone.
We can provide the public with good value products profitably – we must to survive.
Philip Rose is chief executive of Wentworth Rose