Twenty years ago, most chartered accountancy practices took the view that their bread was buttered with auditing and accountancy services.
They were, however, not averse to taking commission from suggesting pension policies to their clients and using the local life inspector to do all the running around and sign up the client. They quite rightly felt that they could lose an excellent client by muddying the water suggesting inv-estments for the MD of their biggest audit.
Since that time, we have been through many phases in the relationship of IFAs and chartered accountants when today we have a situation where most major firms have their own IFA division.
It was, therefore, rather surprising to hear that some worthy chartered accountant speaking at the London Society of Chartered Accountants at the start of November suggested that intermediaries were “money-grabbing, white-socked wideboys”.
Unfortunately, this gentleman, David Rangeley, was not consistent in his criticism, indicating that the average age of an IFA was 52, which suggests they are neither boys or likely to wear white socks.
It is my contention that chartered accountancy practices will never provide financial services well (there will be exceptions). The problem is that a general chartered acc-ountancy practice will invariably be tempted to use the commission received from financial services to cover up their own inadequacy of billing a sensible fee. Indeed, if accountants were to be honest, how often did that pension commission subsidise the audit fee for the awkward client.
One of the biggest problems for IFA businesses att-ached to accountancy firms is the attitude of the chartered accountants towards IFAs. Indeed, Mr Rangeley tells us exactly how chartered accountants regard IFAs.
It is, therefore, impossible for accountants to attract the very best IFAs when the attitude is that the best IFA must always earn less than the most junior of junior partners in the firm. I am sure the chartered accountants will point to the fact that they have obtained a professional qualification which has taken them many years to pass.
But so has the IFA – unfortunately, it just does not currently have the same gravitas that being a member of the Institute of Chartered Accountants affords. However, I think all chartered accountants will agree there are good, bad and indifferent chartered accountants just as there are good, bad and indifferent IFAs.
It would, however, seem to me that the only way chartered accountants will run good IFA businesses is if they make the IFA business equal with their accountancy practice; equal in contribution to the overheads of the firm and equal in its allocation of respective profits.
Perhaps the most important provision should also be that financial services fees and commission should all be credited to the IFA division. Any accountant will tell you that you need to know the real profit of each business and how cross-subsidy accounting is just burying your head in the sand.
The quid pro quo should obviously be that the IFA division should also find clients outside the firm's audit and accountancy client bank which may or may not at some stage be introduced to the other services that the firm provides.
Unfortunately, I am afraid chartered accountants' pride will never allow them to think like that and I believe that most accountancy firms' financial services divisions will always be doomed to mediocrity.
I have two comments to make to David Rangeley. The first relates to when chartered accountants lost the facility for using unpaid inspectors to write their business. They were unp-repared to really research pension products for their clients and used the cop-out that no commission must be good (and presumably charged a fee).
This is a policy which resulted in chartered accountants being the single biggest group of people who recommended Equitable Life to their clients. I must say if I was in practice as an accountant I would favour the commission-sharing route with a firm of IFAs I could trust.
And finally, if Mr Rangeley does not believe I know what I am talking about when I start criticising chartered accountants, he might like to look in the members' handbook and find my name.
I have been a chartered accountant for 31 years and I am very proud of being a chartered accountant. It is an excellent profession but I would point out to Mr Rangeley that I meet a huge number of very professional and highly qualified IFAs and chartered acc-ountants in my line of work and, like all professions, there are good and bad in both.
Peter Hargreaves is managing director at Hargreaves Lansdown