All these reviews are driving me mad. It is the same old story of politicians hoping their radical and forward-thinking actions will lead to an increase in their public profile – they seem oblivious to the fact that what happens is an increase in doubt in the consumer's mind. There are better ways of achieving the same ends without scaring consumers rigid.
And how surprising it was to discover that one of the reviewers is an ex-bank man. And here I was thinking that we were going to get an independent review.
A friend of a friend happens to work for a top four bank. We were watching a news item on the TV about the Sandler Review and the newsreader saying financial advisers paid by commission will not be allowed to call themselves independent prompted a “too right” response.
What a massive generalisation and ill informed – a bit ripe from an employee of a high-pressure sales organisation. The banks are simply big direct salesforces. No wonder the review is a little skewed.
I have read the whole of the Sandler review summary and selected highlights with great interest. The main section dealing with the treatment of commission beggars belief. It seems to have no connection with the real world. Go to the Treasury website and have a read of parts 10.59 to 10.71. It is as if Sandler has never spoken to an IFA and has never seen an illustration. How much clearer do they want it? We disclose the exact amount of commission. If a client does not understand that, then they will not understand anything else.
Just because a product is cheap does not mean the less well off will save, even if they do understand the expenses. They have no reason to, because the state will cater for them in their old age, they hope.
The middle classes are starting to change emphasis from savings and investments to consumer goods and two foreign holidays a year. Just as memories fade fast, people's imaginations go no further than Christmas.
It is IFAs who have consistently recommended the best and only the best – because we can and it is in our interest to do so. It benefits us because we have happy clients who keep coming back – a virtuous circle for all concerned.
Contrast this with the direct salesperson. What are they going to say about the products they offer? They are, of course, the best thing since sliced bread “and bloody hell, I've got to flog this as my next mortgage payment/foreign holiday is due”.
Of course, I know the argument of a direct salesman having a much greater knowledge of their own product range but what if they happen to work for one of the less respected off-ices around? You could be on a level with Einstein but if your firm is fundamentally naff, it is just no good for anyone.
Is it not strange that most decent offices are happy to be put under the spotlight and distribute through us pesky nitpicking IFAs?
What a coincidence then that those offices we would not touch with a bargepole choose to distribute via their own salesforces. It is because they know that we would not recommend them and they would cease to exist. Their only chance of survival is an internal and incentivised salesforce. It does not matter that they know the products like the back of their hands, it is pap they are peddling.
It was only the energetic lobbying of these second-rate firms that prevented a complete move to IFA-only distribution years ago – their very lives depended on it. It was never going to happen, of course, as too many were banks who were too hellbent on shareholder returns to care about what they were flogging.
So as not to be accused of being a grumpy old cynic, my solution to this mess is this – insist all advisers are IFAs (so ban tied advisers) and impose a maximum commission agreement. Market forces would soon work their magic.
Tom Kean is compliance officers at The Analysts