It's official – the end of the world is not now nigh.
We seem to have spent the last two years in a perpetual state of dread, waiting for the next regulatory bombshell that is going to destroy independent advice. CP166 has just been published and, low and behold, Armageddon has been postponed, again.
Threats to our profession are not new but the pace of change (or interference, as some view it) has been breathtaking over the last two years. First, we waited for Sandler and Pickering and spoke of nothing other than the post-Sandler world. Then we realised we would have to wait for CP121 and, when that introduced the justifiably feared defined-payment system, IFAs had found a new Nemesis.
But CP121 was only a consultation document. We have had to wait for the draft proposals in the form of CP166 – and how very different they are from what we expected.
IFAs as we know them will certainly survive and prosper under the CP166 proposals. Many of us already offer the choice of fees or commission and, for those of you who don't, it is less of a problem than you imagine.
I have written before of Aifa's success. Holding the line against defined payment and moving the FSA to the menu system was the Helm's Deep of the depolarisation war. (Without wanting to spoil next year's Lord of the Rings film for those of you who have not read the book, after the narrow survival at Helm's Deep, it is all victories in The Return of the King.)
The really surprising part of CP166 for me is the multi-tie rules, which are not at all what was expected. Having read the paper twice and seen a few early comments, I am still trying to work out why any company will choose to give up independence for the very few advantages offered.
What is clear is that many of the financial advantages that we imagined multi-ties would provide will not be allowed. We had mainly assumed that multi-ties would be restricted to four or five companies which would each pay a king's ransom to be on the panel. We also assumed that multi-tied advisers would grow rich and contented under a tidal wave of override and soft commission. But none of this will come to pass under the new rules.
The rules allow any number of links, including whole market. They allow different panels for each product range and allow independent advice to be offered alongside multi-tied advice. No product provider in its right mind will pay a lump sum to be included on a panel. At the same time, override and soft commission are banned, so multi-tied advisers will be no better paid than IFAs.
Instead, the main IFA/product provider link will be via equity involvement or ownership following the eventual removal of the better than best rule. This makes sense – indeed, there is little alternative. With IFA firms being prevented from raising capital from business loans, due to the ridiculous solvency rules, how else can any IFA grow other than by selling equity? It was the case before CP166 and it will still the case after it.
My own company can claim to be something of a pioneer in this field and so far we have not been scalped. We sold 50 per cent of our equity to Aegon in the belief that development capital was the only way forward and it took the brave move of assuming that better than best would disappear.
Finally, what about the investor? Yes, it really is meant to be about the public, not about the egos and politics of Government departments, quangos and trade bodies. Investors, of course, will get a superior range of services at a better price and with total clarity of understanding.
All I will say is I have lived, breathed and eaten personal finance for 20 years and I cannot understand the rules. It beats me how one firm can be independent, multi-tied with different restricted panels and allowed to go off-panel at the same time. How any member of the public will understand the difference is a mystery.
Still, mine not to reason why. CP166 allows us to carry on being proper IFAs and that is what we intend to do.
Philip Rose is managing director of Wentworth Rose