Other people are having to be nice about this. I checked and nothing in my contract says I need to be nice, so I won’t. Let me start by nailing my colours to the mast. I have a real difficulty with the concept that multi-tie is an acceptable alternative to independent advice.
I think it is a really great alternative to tied advice but I have no idea why a consumer would be willing to move to a multi-tie relationship from a relationship with a true independent, providing that the remaining IFAs make a sensible case for continued independent advice.
There are many in the market who state that if multi-tie improves the products on offer, then what is the difference between multi-tie and independent?
The answer seems to me to be simple. Only the IFA has the common-law position of being the agent of the client. All other advisers in other relationships with the client are the agent of the product manufacturer.
I am clear that they care about their clients and will give them the best advice they can within the constraints of the tied arrangements but they remain the agent of the provider and no amount of clever marketing can change that.
The argument for multitie is being made by the old guard – the “old-style” providers, which always wanted our client base and have tried to capture our market time after time – and failed.
I believe it is time to speak out and say someone has to be on the side of the consumer. It will not be the banks or big insurance companies or multi tied networks or even the FSA. It will be us.
All the surveys have always shown that independent advice is the best advice. Of course, it is, how could it be different? But do consumers understand that? Not enough,I think is the answer.
It is about the branding and positioning of IFAs after depolarisation as creators, managers and protectors of wealth. It is about stating that only the IFA is legally obliged to put the client’s interests first and to act as an agent of the client, not of any provider. I have to say that that is an argument that we have so far failed to make. We have allowed the issue to be fudged, even with the weight of polarisation behind us.
We now need to make our position clear. There are not going to be many sorts of adviser. There will still only be two kinds of adviser – the independent financial adviser who acts for their client, and all the rest.
Being independent is not purely a regulatory position. It is an attitude of mind, a certain integrity, a refusal to be second-best. After all, being a little bit tied is like being a little bit dead or a little bit pregnant. It is not a position that I understand, neither will our clients.
IFAs’ have a reputation for surviving despite the environment, not because of it. Working with them can also be like trying to herd cats. I sincerely hope that these historic sterling qualities will continue to manifest themselves over the next few months and that we are able to make the tough decisions needed to continue to work with our clients.
But we cannot be blind to progress. King Canute showed his adoring courtiers that not even he could stop the tide. Neither can we. It is easy to forget that we are businesses first and advisers second.
We need to remain in business to look after our clients and that means embracing the new regime, positioning our brand, proactively servicing our clients, adopting relevant technology to improve standards and drive down costs.
One final thought. We are about the last business where the economic power lies with the product manufacturer. In almost every other sector you can name, the economic power lies with the distributor, not the manufacturer.
Think about farmers and Tesco, General Motors and your local Saab dealer. Eventually, that imbalance must change, for economic reasons.
I believe 2005 is potentially a very good year for the true IFA. I look forward to being proved right.
Phil Billingham is managing director of PBA