The letter from a “non-churning IFA” struck a chord with me (Money Marketing, August 7). I expect that most of your readers will know of at least one adviser that has been churning in the 1 per cent world.
Presumably, most product providers have been funding such behaviour from their with-profits reserves, which must now be all but depleted. Why insurers have indulged some advisers in this way is difficult to fathom. It is an extremely expensive way of increasing market share.
However, what is certain is that after three years of losses in the share markets, this approach has become unsustainable (that is, if it wasn't unsustainable before).
Although many financial advisers complain that they do not do very well out of it, the 1 per cent world does represent incredibly good value for most investors.
I sincerely hope that product providers will take positive action on this and revoke the terms of business that they hold with firms/individuals that have a consistent record of churning.
With the development of the FSA business ethics forum, it may well be that, in years to come, an advisory firm that practices poor business ethics will have trouble getting terms of business with most product providers. It would certainly be one way of cleaning up the industry.
Director, Towers of Taunton (Financial Services), Taunton, Somerset