View more on these topics

Independent view

The single biggest problem facing IFAs today – what might that be? I imagine that many might think it is professional indemnity insurance.

After all, it is difficult to get. Premiums are massively higher than they have been in previous years and excesses are such that IFAs are self-insuring and paying a premium. Only the biggest of claims will be covered by the policy and I guess that is why most of us would not trade without it.

But professional indemnity insurance is not the biggest problem. So perhaps it is regulation? A relatively new regulator, it is only just over a year since N2, with different terminology and a new rulebook (or books) presents a problem to IFAs but not an insurmountable problem.

IFAs are resilient, they are used to change and soon get used to new processes. The regulators will probably come up with a new historical review of past advice based on the benefit of hindsight but, hey, that is something IFAs are used to as well.

Could the biggest problem be a reduction in the level of commission paid to intermediaries? Possibly but I sense that we are already used to the 1 per cent world. Many firms have moved towards different markets, moved towards charging fees and introduced new processes to survive in a world where margins are reduced. It is not an enjoyable change but it is something we are getting used to.

Depolarisation is with us. Could that be the biggest single problem? Again, I believe the answer is no. Depolarisation brings no consumer benefit at all. You would need an IQ just above room temperature to believe it did but it is not a threat to the IFA. Certainly, some will migrate to a “let&#39s pretend to be independent” culture just like it used to be before 1988 but many IFAs will remain true champions of the consumer and provide unbiased advice.

No, the single biggest problem faced by the IFA today is poor admin from product providers. In the whole of my 30 years in financial services, it has never been worse.

The cost of this is more dramatic than any increase in PI insurance, significantly greater than any extra regulatory cost and has a bigger short-term impact than lower revenue levels.

The service, if that is the correct word, from product providers is a disgrace. Now I should point out that I do not blame the employees at the sharp end. The administrators we speak to on a day to day basis are trying as hard as they can to help but they are badly let down by their managers.

Responsibility for the terrible state of affairs lies entirely with the senior managers in these organisations. Quite honestly, they are perpetrating a con on the IFA community.

They have convinced themselves that they can shed hundreds, sometimes thousands, of admin jobs and somehow their technology solutions will hold the whole thing together. Frankly, it is a joke but not a particularly funny one.

How many times each week are we told that there is a 10day, 15-day or, the best to date, a 22-day backlog for even the simplest task? Even getting such a thing as a fund valuation is not possible when you have taken over the agency of a policy. The product provider still needs to record the change by letter of authority and then chances are if it is an old series type of plan, it will not be on the company internet site.

Rarely, if ever, is a simple policy change completed correctly. Often the product provider system cuts the IFA out of the loop and the IFA ends up with an incomplete record. Often, the policy record of the product provider is different to the record we hold and rarely is it the case that ours is wrong. This does little to help our confidence.

The cost to us of having to do the admin at least twice is much greater than the extra cost of PI, regulation and reduced revenue put together. Any IFA carrying out a Swot analysis of their business would have to put “product provider administration” as the single biggest threat.

Unless the senior management of product providers start to take responsibility for this mess and devote the necessary resources to get it sorted then the word “services” in financial services will truly be a misnomer.

Nick Bamford is managing director of Informed Choice

Recommended

Cofunds makes trail commission deal

Fund supermarket Cofunds has struck a deal with fund managers including Schroders which will see the groups pay trail commission to IFAs introducing unwrapped business. The four fund managers, also including Baring Asset Management, Rathbone Unit Trust Managers and Liontrust Asset Management, have agreed to the move even though none pay trail for directly placed […]

FSA says thousands face losses on bonds

The FSA has admitted that tens of thousands of investors could be facing losses to their capital when dozens of index-linked structured products mature this year.Managing director Michael Foot, speaking to bankers at The Retail Banking Conference sponsored by The Economist in London last week, said that thousands of investors with bonds maturing in the […]

Friends warns of more payout cuts

Friends Provident is slashing payouts on with-profits by up to 20 per cent and warning of further pain to come.The life office says unless there is a strong recovery in the stockmarkets it will again cut payouts when it conducts a review later in the year.It says policyholders are still getting smoothing on maturity and […]

Pru fined £750k for endowment misselling

Prudential has been fined £750,000 by the FSA for endowment misselling.The fine comes after subsidiary Scottish Amicable was found to have missold mortgage endowments between January and December 2000.The FSA says ScotAm advisers did not ensure that consumers had the right risk profile for investing in a product where the loan might not be paid […]

Auto-enrolment: tips for employers

The Pensions Regulator (TPR) has released advice on communications for employers, including three tips to help you with your auto-enrolment duties. 1. Allow enough time to select your pension schemeIt’s recommended that you start to prepare for auto-enrolment at least 12 months in advance of your staging date; additionally, give yourself time to choose the […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com