Continuous reruns of the polarisation debate hardly help toanish the public's mistrust of the financial services industry, especially as there is no need to change the present system.
It appears unfashionable to describe yourself as selling life insurance. After nearly 40 years in the business, I am proud to have seen the pro-ceeds of life insurance policies I arranged guaranteeing fin-ancial futures of families and businesses.
Of course, we provide wider advice. Over the years, I have seen the development of unit-linking, the growth of direct salesforces, changes in commission structures, the abolition of life assurance premium relief, the establishment of networks, financial services regulation, the influence of Europe, an informative financial press and never-ending changes in IT.
There has also been the introduction of polarisation, disclosure and compulsory T&C standards.
I have friends who will also point to the introduction of biros, calculators (who else remembers their forerunner, the Brunsviga?) and fax machines in my working lifetime. I did not start with a quill pen, honest.
We should remember that, having become financial advisers, all the clever advice in the world on savings, pensions and investments must be premised by catering for protection needs.
Only this week I learned of a new client raising young children from the proceeds of his wife's life insurance. I see yet more with-profits endowments amply paying off mortgages (where are the ones that don't, except in projections?).
Before anyone says: “Len would say that,” or “It's only insurance, don't get sentimental” or they remind me of the industry's faults, let me speedily say that I have heard all the knocking before.
Giving advice on using the industry's high-quality pro-tection policies to put money in the hands of those for whom it is intended, when it is needed most, gives job satis-faction, especially when claims occur.
Negative comment discouraging the purchase of financial products concerns me. The Daily Mail recently reported the household savings ratio had dropped to 3.8 per cent, its lowest level for many, many years. Various Government policies and mistrust of the industry were cited among the causes. Mistrust of the industry is hardly assisted by yet another polarisation debate. It seems to have more comebacks than Frank Sinatra.
I cannot see any reason to change from the current system. It seems to me the success of the IFA distribution system (quality and quantity) and the greater public awareness that it is IFAs who “spot the differences” is motivating others to create a third distribution system.
“You thought you had an IFA but we don't want to give you that,” as that great intellectual Chris Tarrant might say.
Debating polarisation should not be about practitioners, nor about the industry providing more choice and competition. For me, it is about consumer confidence. Confidence is rooted in competence, clarity of status and disclosure.
A multi-tie would give an aura of “independence” through selection from six “best” companies. However, do you imagine companies will tie firms to easily cancellable arrangements?
The $64,000 question is who takes responsibility in a multi-tie for the conduct of business, for example, fact-finding, unconnected with selectionof products or providers?
Anyone who does not think there would be a commission war within hours of the approval of multi-ties is living in cloud cuckoo land.
The industry often shoots itself in the foot. Before polarisation, some “independents” mainlined on a few companies' products. Some company representatives held agencies with several companies. Spot the difference. We are beyond that. Don't let us go back.
White labelling? “My Broker is with CGNU.” “Mine is with Allied Dunbar” “And mine's with Friends Provident, I think.”
The responsibility and liability of an IFA is great. Setting up an IFA business with all at risk and an insatiable costly demand for servicing existing business, coupled with the impossible task of balancing your time in all aspects, is an awesome responsibility.
From a commercial viewpoint, rather than acknowledging job satisfaction, many practitioners would feel quite comfortable, given the choice, to turn to multi-tie status. But is this in the public's interests?
The benefits to the consumer of real differences in the type of advice are hardly advanced by attempts to narrow those differences from the bottom up.
It would lead to a type of advice which would widen choice but would not reflect the independence which is now increasingly valued.
Len Warwick is managing director of Warwick Butchart Associates
Debating polar-isation is not about practition-ers – it is about consumer con-fidence. Confid-ence is rooted in competence