If ever there was a time when consumers needed a champion on the high street it is now. With the banks firmly in the media and parliamentary spotlights, are IFAs prepared to be that champion?
In the complex world of personal finance consumers need to have trust. They can either have trust in their own judgement in what they are buying or have confidence in someone else’s opinion. The banks used to be trusted but after the recent news about fudging Libor and misselling hedging products, their brand has been battered again. Is the IFA brand strong enough to step into the breach? One controversial report out last week said no!
In a comprehensive attack on the savings industry entitled ‘Put the saver first’, a report for the Centre for Policy Studies, respected commentator Michael Johnson pronounced the IFA brand as wrecked and called for the terms independent and restricted to be banned.
In his view, when there are more than 360 million UK combinations of retail fund, fund manager and insurance company, trying to meet the FSA’s whole of market and investment suitability criteria is “a ridiculous task”. He also said that putting an end to the use of the word independent would address the risk of confusion around the distinction between independent and restricted.
I have to say that is far too pessimistic. The IFA tag is still a good brand and a reasonably well regarded one, with complaints to the FOS about IFAs at very low levels. The RDR will purify that brand further by making independent mean what it says and by significantly increasing the quality of advice through higher qualifications.
The criticism of course is that far fewer IFAs will remain post RDR, a view that Johnson supports. But perhaps that could change with new business models emerging and, more importantly, a change in culture and our views about saving.
For so long now savings products have had to be ‘sold’, with significant effort and cost, to a public which has found debt much more exciting. Our ‘buy now pay later’ society has not seen the point in saving. That is no longer true. The credit crunch and the world financial catastrophe are likely to force consumers to want to play safe with their money.
There is a real chance now that we will see an increased emphasis on savings as people realise the true cost of our debt binge and how little they will have in old age. Then the demand for reliable advice will rise and consumers will be seeking out independent advice rather than being the target of sales campaigns. They will recognise the value of that advice and that means they will be more prepared to pay for it.
This could well be the turning point for IFAs. With the banks abandoning advice and having very little credibility left to provide it anyway and demand for safe savings and investment likely to increase, this may be exactly the right time to promote the values of expertise and independence. IFAs may not get the fame and fortune of a Martin Lewis but they can still be the consumer’s champion on the high street.
John Howard is a former chairman of the FSA Consumer Panel and a special adviser to Huntswood.