November marked something of an ending for me. With the FSA assuming its full powers at the end of last month, my job as PIA board director to all intents and purposes has finished. So it is time to indulge in nostalgia and reminiscences.
It is over 20 years since I first became an IFA. The term was not invented then. Many people who purported to be independent were largely multi-tied. But there is no way that at that stage the types of changes and increases in professionalism that have taken place in the independent sector could have been envisaged.
It was very much a sales culture and the principal product was 10-year – or sometimes longer – savings plans. Capital units were normal. Single-premium costing was an alien term. Pensions were rarely discussed. Investments were so simplistically sold that I blush to remember the presentations.
We now have degrees where graduates can study to be independent financial advisers. Exams are a regular fact of life and we have continuous professional development. This really has had a marked effect on the quality of independent financial advice.
The knock-on effect is that the cost of an adviser has increased over the last 10 years by 40 per cent – and in the last five by 22 per cent – according to the Oliver Wyman report.
More particularly, it is the training and supervision costs that have increased much more than the advisers' salaries. We all know that we expect greater quantities and quality of business from the advisers that we recruit these days than was ever possible 20 years ago.
But what for many had its origins in a little savings plan, has grown to be very significant in terms of the big picture. No government is going to let us alone and we will always face continual changes. This is because we deal with such an important area of people's lives.
The Government has an incentive to make our sector work in order to ensure that people become self-sufficient and save enough for their future so they do not have to fall back on the state.
Of course, there was no regulation in those days. Anyone could be a window cleaner one day and set up as a financial adviser the next but the regulators have ensured that this is no longer possible. The results are better quality of advice to the public – but at an increased cost to them.
Now our challenge is how to get independent advice to all strata of socioeconomic groups. The top end will be well catered for by IFAs but the lower-income brackets – and increasingly some middle-income bracket investors – may no longer be economically viable for many IFAs to look after.
Everyone needs to be involved with this debate as it is essential to the growth of our businesses that we address these areas as well. Traditionally, advisers upgraded their client banks over time but to expect newer advisers to jump straight into the top end of the market is demanding a lot of them.
Much has happened in the past 20 years and the pace of change is only quickening. Providers are now choosing who their partners will be.
They will be quite choosy about whom they want on board and who will be looked after on a more than a callcentre basis.
It will be interesting to see how this works out and whether providers are savvy enough to suss out the rising stars – as well as those they think have already arrived.
A lot has been achieved in recent years. The industry is a more sober, if less colourful, place than it was when I first joined it.
Amanda Davidson is a director at Holden Meehan