The news that consolidators are under the microscope is long overdue. The number of times I have been told of an acquisition triggering a mass transfer of assets where ongoing charges increase with no corresponding increase in services is far too common to be apocryphal.
Just how this works as suitable advice I have no idea.
But should it surprise us when we operate in a market that has been remuneration focused for so long? People talk glibly about being client focused but few really practice it given their wish to avoid any discussion over fees or costs versus services delivered.
Then there is the issue of moving assets from one platform to another when you take over a client whose previous advice included investments.
If the money is moving Sipp to Sipp or Isa to Isa it is of no issue but where it is a general investment account or an investment bond then its movement will be restricted by the taxation due on its liquidation.
I would be shocked if those using these “locked in” portfolios have ever explained their taxation-led illiquidity when confirming them as suitable. In my opinion, there is little difference between locking people in and taking less than transparent or obvious charges. Both are as far away from treating customers fairly as you can get.
So the FCA needs to act and make sure that size does not mean special treatment. Just because a corporate business model needs cash flow from inaction to survive does not mean it is right for them to act like Vikings pillaging with no fear of being exposed or called to account.
When he was FCA chief executive Martin Wheatley stated he favoured fixed fees over those linked to value and contingent on sale of product. I do think he is partly right: we need to be paid for what we do but we also need some element of risk premium. A mix, not a swap, is where I sit in this discussion about change.
The last generation thought the banks could do no wrong. Regrettably, the banks were not interested in looking after them until they had safeguarded their profits, as their focus had never ever been on client outcomes.
In order to make this step change, the general public needs to understand that they need advice. They also need to realise that, while robo-advice may reduce costs, it sure as hell will not hold their hand when the market drops. We need to engage them then educate them if we are truly to move to a client-centric market. Indeed, there is little point in changing the market if we do not take the public with us.
In closing, next year sees me having completed 15 years as a columnist with Money Marketing. In my first column of 2016 I intend to look back to the start to see what, if anything, has changed.
May I wish us all a lighter regulated year to come – if not from rules, at least from demands for fees and so on. Best wishes to you and yours for the festive season.
Robert Reid is director at The Ideas Lab