Over the last few weeks, I have been meeting with our major life company partners to review business achievements and to discuss matters for the next year with our commercial director and head of research. These have been open and frank business meetings and it is good to see we all have matching weaknesses and threats as well as strengths and opportunities.
The Sandler report and the with-profits review are two of the major issues that suppliers and distributors need to address in a coherent and open way.I will look at with-profits first. The Misys networks are running 15 seminars for our 4,500 IFAs across the UK with Standard Life, Clerical Medical, Zifa and Scottish Widows. These cover, among other things, investment volatility and risk preferences for clients. It is interesting to see that world stockmarkets have been performing badly for clients over the last two years whereas with-profits funds have provided a broadly smoothing element.
The customer proposition for with-profits bonds is fine and commission of around 4 per cent initial and 0.5 per cent trail is reasonable. But with-profits takes some time to explain to customers and I think we all agree that product transparency is poor.
I attended an ABI workshop a few weeks ago where new annual statements were discussed. Overall, the proposals put forward were excellent. You can never go into all the detail, as a client will not read it. But the ABI, linked in with the Raising Standards project, is certainly making huge strides.
I am delighted the research team for the Sandler review are going out and talking to IFAs and providers. Misys believes the consultation period is very important. We will see the Sandler team this month and have appointed DBS chairman Ken Davy to lead our response team. He will also have input on the Aifa response.
One key issue to get across in an open and factual manner is the costs and depth of research involved by our networks to supply recommended product lists to members. This covers all aspects of protection and investment.
Another point to emphasise is that true margins or profit levels are wafer-thin and cannot go down any further without having an effect on the client through either fewer product providers or fewer IFAs. Most countries have a lower of savings as a percentage of GDP yet have higher total costs as a proportion of investment. So we must be doing something right.
We all know what happens when the costs of distribution are stripped out of a product to such an extent that the service becomes poor, the distribution becomes non-existent and the ultimate loser is the client. There is nothing wrong with making a profit in business and the market can sets its own levels for this.
There is no doubt the UK market is far ahead of the rest of the world in terms of regulation and adherence to good business practices. IFAs understand the client's needs and objectives and, through appropriate research, training and development, are able to satisfy those needs.
Cheap or free advice is probably not worth anything. Clients have to pay and whether through commission or fees is irrelevant. As long as they know how much they are paying and choose the medium, then they must be happy.
Let us try and improve but let us remember and recognise what a good job the IFA community is doing for the majority of clients every day.
Smart compliance will lead to a smart business and we all must continue to work on that journey.
Andrew Bedford is head of marketing at Misys IFA Services.