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Kim North: Room for all kinds of advice

Kim North

As we await the FSA papers containing the information required to scope the full range of distribution choices, specifically simplified advice, many distributors of financial products, including the aggregators, banks and IFAs, are yet to decide what distribution and advice options they will offer after 2012.

Banks and insurers eagerly await the simplified advice option as the FSA has indicated that advisers operating in this environment will not need QCF level four qualifications.

It is estimated that around 30 million people in the UK will not be able to afford fees and will receive no advice from IFAs or restricted advisers. As a result, the simplified advice and general guidance such as that offered by the Money Advice Service will be welcomed by the majority of the population.

For the wealthy, it is a different story. In June, Skandia surveyed 500 UK millionaires who said they are five times more likely to take advice from an IFA than a tied adviser, with only 10 per cent seeking advice from a tied adviser linked to a life company or insurance company.

Common sense, backed up by research, leads me to believe there is a place for independent, fee-charging, highly qualified advisers, restricted advisers for those with smaller amounts of money and simplified advice for millions of consumers with straightforward financial needs. After all, simplified advice is better than none at all.

The FSA recently answered questions on aspects of the RDR many of us were unclear about. Some of the answers were blatantly obvious, such as those who are not qualified to QCF level four can still conduct a fact-find, products that are too high-risk for some clients may be appropriate for others and that charges should reflect the service provided, which has always applied to service-led businesses.

My concerns are that the FSA will not be able to list on its register who is independent and who is restricted, or identify the firms that offer more than one status choice for consumers.

Alongside the FSA’s weakening of the independent brand, some commentators, including some high-profile IFAs, have recently derided the IFA acronym and Unbiased.co.uk/IFA Promotion’s blue roundel, a kitemark of quality seen in thousands of office windows around the UK.

If independent advice, which is the gold standard of financial advice, is not communicated to the public, this will not be treating customers fairly as they will be confused about which type of adviser they can choose to see.

Commentators must keep the consumer in mind when criticising the same things that have created considerable businesses and income for many of them over the years. Most people are already confused enough about where to go for financial advice without reading in the press that it is about to get more complex – and that what is available now is not very good.

Kim North is managing director of Technology & Technical

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Kim, a good article. I cannot argue with much of what you have said, and if truth be known what little I might argue with is not really worth arguing about. I agree, but I think on some points we’re too late to stop the rot that has set in.

    Regarding the IFA acronym, and the Blue Roundel you may have read my comments a few weeks back saying that it had lost some of its currency. I wish it hadn’t. Not too long ago there was a very clear differentiation between Independent and Tied advice, but the waters have been truly muddied by this regulator.

    The other problem is that independence is only related to product distribution, and there’s a new breed of adviser in the mix that sees product distribution as a small and final part of their overall service offering. It’s difficult to know what the ‘independent’ tag applies to in the world of cash flow modelling, financial life planning, and anything else that makes up the activities of such firms and individuals.

    Finally, the IFA acronym and it’s associated acronym has been unwittingly hi-jacked by anyone who wishes to comment on the state of financial advice, whether it’s IFA or tied. We want it to refer solely to independent firms and advisers, but in the eyes of the public we’re all IFAs, and I don’t think it’s going to get any clearer anytime soon.

    The unbiased website has a nice ring to it, the term unbiased hasn’t been unsullied, though the Money Advice Service is trying to poach it.

  2. Alistair Cunningham 1st September 2011 at 7:08 pm

    But “the wealthy” (defined as millionaires, above) probably principally believe they need independent advice as that’s what the media, PFS/CII, IFP, AIFA, ABI, unbiased.co.uk and numerous other bodies have told them for years! Under the new labels, a high quality ex-independent with a slick process could chop and change providers at will, and be restricted because (for example) they refuse to equity release! I can see a big reversion to ‘restricted’ but that label will cover both the good (many ex-IFAs), the bad (the banks) and the ugly (St James Place – love ’em or hate ’em!)

  3. I totally disagree with the concept of simplified advice in the first place, as is always leads to miss-selling! Have we learned nothing from the past errors, particularly in the area of bank advice?

    After all do you hear of a partly qualified Solicitor?

    If people want to specialise in a particular field then that’s fine, as long as they have a good understanding of the overall concepts of financial advice. Too often simplified advice leads to miss selling, as often the provider of this type of advice is only trying to shoehorn their customers into a limited product range that may not suit that client’s situation.

    Banks and Insurance Companies should be product providers and not advisers, this is the only way consumer can recognise professional advisors from sales reps who are often under immense pressure from targets and management to sell unsuitable products. If these organisations want to sell their products, then do so by having people that are called Sales Reps and not try to dress them up as advisers or cloud the situation by calling it simplified advice.

    As long as this muddled thinking is going on we are going to be doomed to repeat the mistakes of the past. We also need a regulator has the balls to take on the large corporations like banks and insurance companies rather than looking for ways to reinvent their stitch up advice process.

    If we are going to have product providers selling products with no advice then there has to be a greater emphasis on whether that product is suitable for the marketplace. Too often we have a regulator that is not willing to ban products we only have to look at the structured bond market place to see the dangers of the regulator not acting sooner enough.

    Simplified advice simply could be a charter for banks and building societies to make profit without having any consumer responsibility.

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