You are correct that the first nearly 20 years of my career in the investment management industry was pre-regulation. This made innovation easier where I was involved in inventing the managed currency fund concept post the abolition of exchange controls and the umbrella fund concept in 1985.
I believe, genuinely, that investors in the Guinness Flight Funds pre-regulation got just as fair a deal as post-regulation. It is all about integrity where Tim Guinness and I sought to manage our business with integrity. It strikes me in many respects that integrity in the City has declined as regulation has advanced, facilitated in part by rule-based rather than principle-based regulation.
I have sought to champion IFAs for as long as I can remember, largely, because I felt there was a wrong establishment bias against them. My Guinness Flight experience with IFAs was that most of them did their best for their clients which was necessary to retain and build their client base. Also I observed that they were not earning huge sums of money.
My views about commission remuneration is that it should be wholly transparent. I do not agree with the innuendo that IFAs will use the funds/products which pay the highest commissions. First of all, in most cases, there has been a “much of a much-ness” with regard to commissions. Secondly, no one seems to be complaining that insurance brokers handling motor car and home contents are remunerated by commission. The words you quote “those who use IFAs are entirely the sophisticated population” read somewhat strangely to me – I have always been aware that IFAs serve a broad band of the population.
I have for long taken the view that clients across a broad range prefer to pay by commission when they deal rather than advisory fees.
I have always been less supportive of the established life companies where “bad habits” had developed over a long period and, like the banks, there was too much of the “flog financial products to punters”, as you point out.
In summary my view has been, for a long time, that most IFAs do a conscientious job for their clients, as validated by the findings of the Financial Ombudsman, where most cases involving IFAs have been found in favour of the IFA in contrast to Bank cases.
Outlawing commissions and requiring fee remuneration will, I believe, have the effect of removing any form of independent advice for the great majority. The more sophisticated IFAs with a “professional” client base will do well out of RDR and pick up clients from IFAs who decide to close down.