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Independent view – John Winful

In my opinion, IFAs under-value their services because they have failed to get away from the fact that they sometimes have to be salesmen.

Salesmen are always eager to please their clients and sometimes do not see the service and the benefit they are providing for that client.

My belief is the IFA industry is in a transitional period from being a group of salesmen to a profession. This means some IFAs still regard themselves as salesmen first and advisers second. To be taken seriously by our clients, the industry regulator, our networks, and our clients’ representatives bodies, we must adapt to being advisers first and salesmen second.

For some IFAs, this transition is taking longer than I had hoped for and we are still stuck in the time-warp which dwells on the concept of commission. This mindset must be changed. There must be a clear justification of your commission and you must be able to show the advantages of that form of payment over any other form. If you cannot, then take a lower commission or take a fee.

The reason I am particularly banging on about this is that I saw an article by someone purporting to represent my views as an IFA, stating that the new IFA IDD document and cost of services document was the thin end of the wedge and he saw no reason why advisers should have to inform a client as to the average commission payable for a product.

The question I would ask is what are we afraid of?

If your fees are higher than the industry average, then justify them. If you cannot, then do not charge them. It is as simple as that. Some IFAs have in the past acted absolutely scandalously towards their clients. Some have charged fees and commission and also taken renewal fees.

I know this from personal experience of a client I have just picked up from another IFA. This IFA charged the client an annual fee of 300 and also took renewal commission to the total of about 1,500 a year. He did not contact the client in a period of 12 months and did not produce any sort of report or annual statement to the client.

How can this IFA justify these fees? What is the added value this IFA has given to his client and why should the client continue to suffer this in an environment in total ignorance of what the industry norm is?

This is unfair and if we try to justify this behaviour, the environment in which we work will just become more and more Draconian.

We all, as an industry, must accept blame for the environment in which we currently work. We are grossly overregulated because of our indiscretions in the past and therefore we now must be open to the point of absurdity in order to rebuild the trust of the general public and of the regulator.

I see these new menus of costs as part of that process. If you are going to charge above the industry average, show why you are charging this, show how you add value and why your services are above the average. If you do this, most clients have no problem with paying the additional fees or commission required.

We must be professional in the way we treat clients, open in the way we are paid and justify the payment for our knowledge. If we do this, we will again build the trust of the general public, and not be regarded as a group who just grab commission and add absolutely no value.

In this day and age where information can be easily obtained from the internet, clients know what the industry norm is anyway, and if they do not they can find it out. So it is better you tell them what the norm is and why your charges may be different than for them to find out for themselves. It puts you in such a stronger position.

IFAs are uniquely placed to give clients a service and advice that they can obtain from no other source. For example, what other profession – note I use the word profession because I do regard IFAs as a profession – can tie in a residential mortgage with a pension with a commercial loan, life cover and inheritance tax planning?

IFAs are unique and the knowledge and experience that we possess should be paid for.

How you choose to obtain your payment is your business and thank goodness the reg- ulator has agreed that.

All the regulator is now saying is that advisers should provide justification for their payment and that should be simple enough.

We should not undervalue our services and I, for one, find it very easy to justify why my fees are sometimes above the industry average.

John Winful is a partner at Winful Associates


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