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Independent view

From where I am sat, looking at the new proposals for depolarisation, it

does not look too different from what we have already. I suspect that many

IFAs and life companies will be laughing up their sleeves that their

lobbying has stopped the previously proposed three-tier system.

But it is a short-term victory. The crux of the matter is that investors

still do not get advice, they get products.

What does every IFA want to know from the life company&#39s broker consultant

(and no one is guiltless)? “What can I sell the customer?” However, the

answer over the last few years has been:

•Endowment mortgages.

•Personal pensions.

•School fees plans.

•Distribution bonds.

•Technology Isas.

•10 per cent structured derivative products.

•With-profits bonds.

•Today, property bonds have been added to the list, right at the top

of the commercial property boom.

I also believe it has been a great year for inheritance tax planning – not

that there has been any planning going on. The poor old investor has been

stuffed into some high-charging, low-performing offshore bond with an

expensive trust arrangement.

What is different with this new menu system? It tells clients how much they

are going to be charged to be stuffed into these different products.

How I wish CP121 in its original format had been set in stone. It seems

perfectly reasonable to me to describe somebody as either a tied product

salesman, an independent product salesman or a professional adviser.

There would have been a great transitional period during which people in

the middle ground could decide which way to go. They could have all started

out as AFAs and some would then have moved to the tied route because of the

nature of their business.

There is no stigma attached to being tied. Ask the people who work for

Rothschild Life and Allied Dunbar. Indeed, Equitable Life salesmen made a

virtue of it.

The people who really wanted to remain independent would have an

opportunity to fence-sit through a transitional period during which every

journalist, accountant, solicitor and investment commentator would be

telling investors that they must go to someone at the professional end of

the spectrum.

There is no question that very few investors would initially be prepared to

pay the fees at that end but a few brave souls would embark on the road to

actually advising clients rather than flogging them a product.

I envisage a time when the people who offer advice will not actually supply

the product. They will suggest that the client goes to a quality,

trustworthy wholesaler who has to warrant their actions to the professional

adviser. Or the client may prefer to buy investments, on which they have

been advised, execution-only from the cheapest discounter in the

marketplace. (Many do this already, that is, take the advice and cut the

adviser out.)

It is in this area where I believe we will see the greatest changes in our

industry. I believe that most investment products will be marketed by

manufacturers, just like medicines are marketed by pharmaceutical

companies. Professional advisers will recommend them, just like doctors

prescribe drugs, and retailers will supply them. The actual salesman will

no longer exist.

No one in this industry should aspire to be a salesman. We already have a

euphemistic name for the industry&#39s salesforce – independent financial

advisers. They now have to make the transition to become true independent

financial advisers, not leave themselves open to be categorised with people

who sell timeshare and double glazing.

Whether we like it or not, I am afraid this country does not like people

who actually sell to the general public. Today, almost everything you buy

is supplied, not sold to you.

I am afraid our Government, our regulator, the national press and consumer

associations will never be satisfied until the salesmen are completely

stamped out of our industry. It is up to you to decide where you are going

to position yourself in that brave new world. Commission has escaped for

now. It is a short-term victory.

Peter Hargreaves is managing director of Hargreaves Lansdown

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