When I was asked to write this article for Money Marketing, I sat there and thought, what do I write about that has not already been written about our industry in the last 12 months? In other words, how do I make this positive rather than the negative garbage that we have been put through as an industry?
First we had pension mis-selling, then we had the endowment review, which seems to be ongoing as the market and with-profits bonuses fall, this keeps coming back over and over again.
This was followed by the review of FSAVCs and, to cap it all, a review of split-capital investment trusts to see if we had been misselling those as well.
It seems that as an industry we have been accused of everything from gross incompetence to fraud. You might get the idea that people do not actually want IFAs around but that is clearly not the case when you talk to clients. In fact, more than ever, clients need us.
Each review of the various things that the FSA thinks is wrong with our industry has found that the incidence of misselling by IFAs is quite low.
However, having established this, the FSA still wants to go ahead and expand the number of products that are available to the tied market and extinguish the IFA if they do not accept fees – which the majority of clients are unwilling to pay.
I have said I would not get into this negative banter, which only makes my blood boil. What I want to do is look at the positive side – at what is going right and the business opportunities ahead.
I have been an IFA for 10 years. In those 10 years I have seen unbelievable change. I have seen reason-why letters go from “Here's the product I advised you to take Mr Client” to five-page essays making sure you are fully covered for any possibility of a law suit.
Incidentally, 80 per cent of my clients tell me they do not read my letters because they trust me – and I know they do not read them because they ask questions that have been addressed in the letter.
So here are the positives.
As an industry have seen a remarkable increase in protection business.
Clients are more aware of the protection they need but need the specifics of that protection to be explained to them further. I believe that this market will grow bigger.
Inheritance tax planning is an area that clients are becoming increasingly aware of. I can see a greater growth in this area because, with the vast increases in property prices we have seen over the last five or so years, many people who would not consider themselves wealthy now have an IHT problem. This is an area where only an IFA taking a holistic approach can help.
I also see a growth in mortgages, especially with first-time buyers, adverse cases, and the bigger purchases which need far greater planning than just “here's your mortgage, here's your repayment, sign here sir”.
The advent of procurement fees by lenders makes this an another growth area for IFAs. I now see pensions as a growth area, with the Government talking about compulsion.
Compulsion would make this an area where an IFA's advice would become a necessity.
I used to avoid withprofits investments like the plague because of transparency issues. However, the new rules on transparency mean that insurance companies are now bringing out transparent with-profits inv-estments with clear definition for reasons for bonuses with clear charging structures so that clients can actually understand these investments.
This will give clients grea-ter confidence and revive this investment area.
When I started in the industry, the number of IFAs was 80,000, now I believe the number is 23,000.
The number of clients available is 28 million. It does not take a rocket scientist to tell you that, per IFA, there is a large market out there waiting to use your services.
I am not saying ignore the negatives – deal with them because that is the nature of the business we are in. I am saying we have a duty to our clients and our potential clients to stay focused on the things that matter to them and that is to provide independent financial advice to help them achieve their goals. This is the only thing that matters.
We have to accentuate the positives, deal with the negatives, and ignore the in-betweens.
John Winful is an IFA at Winful Associates