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Graham Bentley: Why IFAs can end up in my firing line

I am far from anti-IFA but in certain circumstances my priority is the greater good of the industry

On a recent golf day, an adviser acquainted with my various scribbles asked me if I was Auntie Ivy. I was lost for words. Although my wife might describe my hearing as selective, even she would not identify it as defective. As it turns out, he actually said “anti-IFA”. I was relieved, but then rather nonplussed. My opinion (and of course that’s all it is) might occasionally be at odds with trade magazines’ readership, but the anti-IFA jibe came as a surprise.

The cause of my inquisitor’s playful (he tells me) ribbing was in response to missives I have written that he claims read as adversarial.

Mea culpa – I certainly challenge those advisers you and I know who perform tenuous (and tedious) investment management using passive model portfolios simply to command an ongoing ad valorem fee, attempting to justify associated financial planning charges. I question platform facilitation of fees, thus maintaining the pre-RDR client experience. I suggest advisers pay the platform fee, rather than the client. You get the picture.

Graham Bentley: Too many costly funds are doing the same thing

But I am not anti-IFA. I used to be an adviser (admittedly 40 years ago, and for only six years). I have an IFA, whose service (and badinage) I value. We have advice businesses in the UK, Europe and Africa that choose us as their proposition consultants and/or investment advisers.

There are others who choose to use me as their external investment committee member, and yet more who ask for guidance in that regard. Our annual revenue from adviser clients forms close to 25 per cent of our total income – not insignificant.

Commercially, then, advice is important to us. That said, we do not play the PR card. We do not profess to do business coaching or partake in quasi-scientific behavioural rah-rah self-help sessions redolent of 1980s motivational presentations, while organisers unceremoniously pocket provider-fed sponsorship fees.

We provide consultancy services across asset management and distribution (you may not like the term but that is the reality – you are a distributor of funds. Try running a portfolio of securities).

We formulate and perform due diligence on investment propositions, as we are trusted to know our investment stuff technically, marketing intimately and a bit about customers coincidentally. Where necessary, we hire in lawyers and wider operational expertise we do not possess to get the job done.

‘Managing money is a privilege’: Industry reacts to platform study

If you need help, we will tell you and heal you. If you are great, you probably already knew that but you will pay us for the confirmation.

Like quality advice, investment consultancy is about having a set of skills, experience, first class connections and associated insights that clients can leverage to fine tune (or in some cases completely upend) their current marketing or propositional strategy.

It is not (in our case at least) a PR role. I do not feel the need to champion active management or deride passive advocates. I do not need a commercial driver to fine tune my principles in order to earn a crust.

Where there are conflicts of interest between clients, I withdraw from debate but, generally, I am carefree enough to say what I think.

Despite possessing the greatest potential benefit to customers, advice is the most expensive and vulnerable discipline in our industry. I will be damned if I suffer its occasional fools gladly.

The FCA’s platform market study is a case in point. I have been closely associated with the development of adviser platforms via M&G’s involvement setting up Cofunds, through Selestia’s online emergence and ultimately Old Mutual Wealth’s vertically integrated model.

The idea of the client paying anything more than £10 a month for a platform clearly created to make the adviser’s life easier never sat comfortably with me – especially now I am a paying client

I am a great admirer of Nucleus chief executive David Ferguson’s indefatigable championing of quality advice and customer advocacy.

Despite this scaffolding of support, the idea of the client paying anything more than £10 a month for a platform clearly created to make the adviser’s life easier never sat comfortably with me – especially now I am a paying client.

Some of the platform defence statements by advisers are debatable and might have been better internalised. That said, during the platform study consulting period, I found the FCA team at once appreciative of platform services yet disparate on clients’ advantage.

Most team members had little understanding of the history of platform development and so had limited context within which to ingeniously apply the data they painstakingly aggregated.

The suggestion that platform tools like asset allocation or cashflow modelling are adviser aids, and consequently inducements rather than client benefits, is rather like saying X-rays make diagnosis easier and hence are an aid to consultant surgeons rather than a patient benefit. This is plain nonsense.

FCA warns advisers over platform inducements

The regulator steers past the less complex point – utility platforms simply acting as trading and custody kit should be paid for by the adviser. That is a personal view I am happy to debate with anyone.

Similarly, the idea that your average Joe or Julie can unadvisedly robo his or her way to financial contentment is, for the time being at least, patent nonsense peddled by consultants whose business models require them to stand in the “look at me, I know what AI stands for!” tech-garnished vanguard. As we used to say, pioneers get scalped.

I write this stuff because I care about quality financial services and associated client outcomes. I am not anti-IFA but I am certainly an advocate of top-notch, fully-integrated wealth management services, and dismissive of anything less.

Occasionally, you might get upset if you do not match my vision, but then you do not have to pay me. Just shout “Auntie Ivy”.

Graham Bentley is managing director of gbi2



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There are 13 comments at the moment, we would love to hear your opinion too.

  1. For a firm with a 1% fee model paying a 25BPS platform fee still leaves a healthy profit on a larger fund if there are economies of scale. If the fee model is 0.50% then paying half for the platform and the rest towards regulation,PI cover and office costs puts you out of business.

    However you dress it up, the client fee has to be sufficient to maintain the business and provide clients with an ongoing service, the same for any service based industry.

    I think the real problem is the operating margins which allow some business owners to enjoy excessive lifestyles, but it is for consumers to decide what they want to pay and whether the service is up to the standard they expect for that price, MiFID11 will help with cost disclosure, which RDR did not really deal with effectively, 3% plus 1% is alive and well and a “norm” to hide behind.

  2. Worst advertorial I have read in a long time, unless I wanted arrogant and smug from a consultant.

  3. “We do not play the PR card” but I write articles such this one extoling my virtues! ha ha

  4. Trevor Harrington 2nd August 2018 at 2:54 pm

    Good afternoon Graham,

    Well … that was a bit of a hoot dear boy.

    I appreciate and agree many of your points, but did not fully understand some of the words and context that you used.

    However, if I can summarise your article, may I suggest that the issue is not “what we are paid”, and contrary to the regulators thoughts (as in their very expensive RDR nonsense) neither is it “how we are paid”.

    The issue is, and always has been – “does the client know how much we are being paid?”

    I would venture that very few clients are aware of the full amount that their Adviser is being paid from their “accounts”, in the course of a year.

    I have advocated for several years that Advisers should be required (by regulation) to send their clients an annual statement showing the full and total figure that they were paid on that client’s account in the preceding year.

    Only then can the client properly weigh up – “service received Vs Cost paid” …. and many clients, if not the vast majority, will have quite a shock.

    Any Adviser who is providing a proper ongoing client service proposition, will by definition, be utilising one of the many client data and service software, and all such software is capable of producing the annual fees received figure per the client, per the previous year, … at the touch of a few buttons.

    Why don’t they do it already … you know very well what the answer is to that question.

    Incidentally Graham, it is good to see you are still around too … I guess we are survivors, but it is also good to see that we are both still huge advocates of the IFA.

    warmest regards


  5. Seriously why is it that the pinks allow these articles by agenda driven business owners or consultants

  6. Not so much Adversarial, as Advertorial. Do the research amongst genuine Clients with an IFA over the past 30 years and see what they think.

  7. I hope you will not take my frankness as being rude Graham but whilst you are entitled to your opinion you have no special experience or skill for anyone to attach any weight to it.

  8. Hi Trevor

    Long time no speak and yes, still here and perhaps surprised that comments appear not to have noticed I’ve been writing a monthly column for MM (and Professional Adviser) for 2 years. Perhaps this month’s – in isolation – looks like a pitch, but frankly we’re not after adviser business and just setting the record straight following comments on earlier articles. Next is likely to be around model portfolios, utter lack of understanding re assumptions used versus risk/returns experienced, and subjective naming conventions.

    Keep an eye out!

  9. Having worked as an IFA for far longer than Graham did, I can remember what it was like advising clients with a range of different ISA and non-ISA investments, and several non-platform pension plans to get diversification for a client. I also know how much easier it is now advising clients “on platform”.
    I suppose I could go back to the old way of working, but I will guarantee Graham three things: the client detriment will increase due to time out of the market every time we make a portfolio change or switch provider and due to the increased product charges the client will pay; the client will pay higher advice charges due to the extra time and hassle we will incur in managing their affairs; and the client will also pay higher charges due to the fact that services such as asset allocation and fund research that are often provided free (as Graham alludes to) will now have to be bought in at additional cost.
    These three reasons alone should be enough to debunk this myth that platforms are there only for adviser benefit and so should be paid for by the adviser.

  10. As a mere IFA I am struggling with the concept of the word “carefree”.

  11. In fairness, we should not have read past, ” I used to be an IFA” because he didn’t. 40 years ago, he was an unqualified salesman with a lot of products.

  12. Why does paragraph 18 of this article not surprise me?

    Which of the following two scenarios would a consumer prefer?

    Scenario 1. Adviser currently charges 0.75% and platform charges 0.25%. Client stops paying 0.25% for platform as IFA now pays for it, and IFA’s charge increases by 0.25% per annum to 1% per annum to compensate. Adviser subsequently recommends that client moves their assets to a new platform as it charges IFA 0.2%, but IFA retains their charges at 1%. IFA subsequently recommends that client moves their assets to a new platform again, this time because it only charges the IFA £10 per month, whereas the previous 0.2% charge equated to £1,000, but IFA still retains their charges at 1%.

    Scenario 2. Adviser currently charges 0.75% and platform charges 0.25%. Adviser subsequently recommends that client moves their assets to a new platform as it charges 0.2%, but IFA retains their charges at 0.75%. IFA subsequently recommends that client moves their assets to a new platform as it only charges £10 per month, but IFA retains their charges at 0.75%.

  13. “I certainly challenge those advisers you and I know who perform tenuous (and tedious) investment management using passive model portfolios simply to command an ongoing ad valorem fee, attempting to justify associated financial planning charges”.

    What is this difference between this, and active model portfolio’s apart from the obvious +75 to 100 basis points along with almost guaranteed under-performance?

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