I have just finished presenting at a series of roadshows for Scottish Widows on the twin subjects of pension simplification and the effect of depolarisation on the IFA community.
Hundreds of IFAs attended what was a superbly well organised series of events and Scottish Widows head of market development Ian Naismith provided an incisive insight into the planning issues in the runup to A-Day. There is a lot of work to be done.
My job was to give my opinion on the impact of depolarisation and the threats and opportunities this delivers to IFAs. They are a resilient bunch. They cope well with change and deal robustly with threats. They are not shy about taking advantage of opportunities. How often have we heard in the past that the IFA was doomed? Post-April 1988 and post-polarisation, we were told that we had at best a limited future.
We were also told that dir-ect salesforces would dominate the market. When product and commission disclosure came in January 1995, the writing was again on the wall, there was no way we would survive telling a client exactly what we were going to be paid.
Of course, the reality was far different from the perception. Between 1988 and 2004, the IFA sector has increased its share of the distribution of financial products from 20 per cent to 64 per cent of the market.
At the same time, we have seen the decimation of the direct salesforces of old. There is a simple truth in all this and it is that, at long last, the consumer has understood the adv-antages of independent advice. This is a phenomenal result and should be sending out a loud and clear message to pro-duct providers, legislators and regulators alike, if you want the UK savings gap problem dealt with, then you must support the growth and development of the IFA sector.
Yet here we are faced with depolarisation, all because the director general of the OFT declared that polarisation was anti-competitive. What abject nonsense? The IFA market is the most competitive and consumer-oriented sector in financial services and its dilution by the introduction of multi-ties is designed to confuse and disadvantage the consumer. Frankly, multi-tie is a con and the only reason an IFA will embrace it is because of the anticipation of higher levels of commission and the only reason the product provider will offer it is because they want distribution channel control.
It will be presented to the world as pseudo-independence by some practitioners and my real hope is that the consumer will see through the con being perpetrated on them and always seek truly independent advice.
I also see a form of repol-arisation happening with the proposition to the consumer from the IFA polarising into an independent whole of market sales proposition on one hand and a more holistic independent advice offering on the other. I am not saying by the way that one firm cannot offer both but I believe that the consumer will respond positively to a crystal clear advice offering followed up by a product selection and placement service. In other words, perhaps now is the time to start separating advice and product.
This will, of course, require the client to accept that they have to pay for advice. I am constantly entertained by advisers who say that clients will not pay fees. I think in the main that they mean clients will not pay my fees when I set them at the level of the commission I might have received had I sold them something.
I am neither anti-commission or pro-fees. What I am in favour of is value for money and realistic billing of clients. Multi-tie seems to me only able to operate on a commission basis, nor is it complete advice, it cannot be because such an adviser will not be able to provide advice about a product manufactured by a company which is not one of its hosts. So multi-tie brings to the consumer expensive, incomplete pseudo-independent advice. Now that is anti-competitive.
My advice is quite simple. Stay independent whole of market and offer a powerful proposition to your clients that is well priced. If the IFA sector does that, it will see its market share continue to rise.
Nick Bamford is managing director of Informed Choice