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Liversidge Vs Cardy: Who should represent IFAs?

’Aifa hasn’t betrayed independence and the door is open to make common cause’

Aifa has been roundly denounced by some for supposedly betraying the “independent ideal” following its decision to continue to accept as members those firms who might, after the RDR, find themselves defined by the FSA as restricted. The denunciations are ironic to say the least, as most seem to emanate from those who are not and never have been Aifa members.

The key word here, of course, is “continue”. Faced with the FSA’s moving of the goalposts on independence, Aifa decided it should not exclude the type of firm whose business model would have defined them as independent before the RDR. We chose a reasonable person’s definition of independence recognisable by your clients and mine.

We did not accept the FSA’s diktat sorry, definition (whatever it turns out to be it seems somewhat confused). Instead, we talked to our members about what they wanted and expected in the new landscape. I find it strange then that anyone would want to set up a new organisation in acquiescence to the regulator’s arbitrary view of independence after 2012. That is a strange beginning for any organisation which would have us believe it would fight harder for its members.

And then there is Europe. We cannot play King Canute. If Mifid is going to define independence in a way that is very similar to our new membership criteria, then Gill Cardy is building something that is already outdated. Aifa may find it will still only represent IFAs (by European definition). Will Gill then lead the “real IFA”?

A trade body is essentially a political entity, in that it seeks to bring about or prevent regulatory and legislative changes. Anyone who has ever been involved in politics knows that most support clusters around the centre. The ice cream seller who sells the most is the man in the middle of the beach, not the one at one extreme or another. Aifa is a coalition broad enough to represent all independently minded advisers but not so broad as to be seeking to be all things to all men.

When we defined our new constituency, I think we got the balance right and I would die in a ditch to maintain my independence. It is perfectly possible though that the FSA’s definition, when it finally crystallises, will cast me as restricted, even though my business model will not have changed one iota. Am I then to be the subject of a Stalinist-type purge? Gill’s definition effectively means that she will be vetting candidates. If I were to apply to her now, she would presumably do her due diligence on me to check my eligibility. Is she really asking the IFA community to submit themselves to her assessment of their independence?

Gill, Alan Lakey et al I urge you to make common cause with us. Together, we can make Aifa the effective force we need and of which we can all be proud. I genuinely believe that you have misunderstood where Aifa is now, how it works and where it is going. Whatever changes you might want, they cannot be achieved from the outside. For you and all advisers who put clients’ interests first, the door is open. We have talked to our members. You could have participated in that conversation. You still can. Talk to us and discover the reality.

Neil Liversidge is a member of the Aifa council

’We can only be properly defended by one uncompromising organisation’

For 20 years, we have lived with the concepts of independent and tied, adding multi-tied and, more recently, whole of market to our regulatory dictionary.

After 2012, it is simple there will be independent advisers and there will be restricted advisers full stop.

The new rules offer a simple distinction, independent or restricted. The definition of restricted is “advice that is not independent” (or basic, to be absolutely precise). No distinction between “as nearly independent as makes no difference” or “bank advisers”. One line, clearly drawn. Are you independent or not independent?

Research shows clients want independent advice, in every sphere of their lives. As a tied agent, I discovered other companies offered better products and investments and, wanting to serve my clients’ best interests, I decided to become an IFA.

IFAs and others have spent two decades arguing that clients value our independence, that we value our independence. What will change on December 31, 2012? Some suggest only a handful of firms will meet the independence criteria. This is the inexorable conclusion drawn by firms with vested interests and who make the rule changes out to be very complicated, very costly and impossible to implement. Most discussions on this subject focus on the firm’s proposition and profitability, not on considerations of serving the client’s best interests.

But as in the film Sliding Doors, there is an alternative future affected by the choices we make here and now. Advisers who are currently independent, whole of market, offering a fee option paid by the client or from a product, conducting research, undertaking due diligence, creating panels, building investment portfolios, basing recommendations on their own financial planning and investment philosophy will not have to do anything significantly different. You will choose to remain independent because it matters to your clients and to yourself.

Only an organisation focused exclusively on independent advisers can make sure their specific interests and concerns are properly represented. If there is any confusion about what independent means and the impact of the new rules on clients, compliance and the advice process, only a body committed to independence can ensure regulators provide clarity and that providers, advisers and other stakeholders understand why independent advice is so valuable.

hange is never totally straightforward but if the reality is that being independent is unfairly onerous, then the answer is not to give up your independence. The answer is to challenge the regulator, to ensure consistency, provide clarity of expectations and monitor proportionate regulation.

Coalition politics has seen Conservatives and Liberal Democrats engaged in verbal gymnastics. They attempt to stand by previously held passionate policy commitments while compromising their positions in an effort to preserve coalition unity.

Independent advice really is under threat and it can only be properly defended by one uncompromising organisation, totally committed to independence and speaking out exclusively for the interests of its independent member firms.

Gill Cardy is managing director of the IFA Centre


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There are 21 comments at the moment, we would love to hear your opinion too.

  1. Gill is quite right, but if you have a firm of 5 independents who want to recruit a specialist then those same 5 will have to change their designation from independent to restricted even though they are still as individuals independent! A firm cannot be a mixture of the two -August 2011 FSA Guidance Consultation.

  2. IFA Centre appear to be very in tune with the relationship clients should expect from an IFA. So based on this I would want to hear more from them.

  3. Common cause or common purpose?

  4. Terence P.O'Halloran 4th November 2011 at 2:06 pm

    To quote Gill Cardy: “Change is never totally straightforward but if the reality is that being independent is unfairly onerous, then the answer is not to give up your independence. The answer is to challenge the regulator, to ensure consistency, provide clarity of expectations and monitor proportionate regulation”

    I know Gill and Neil well. I am well acquainted with their views. They are both driving the same argument. Why IFAs need yet another ‘voice’ is beyond my comprehension.

    It has taken the last umpteen years to turn IAFA around to an independent way of thinking. Now we have to modify the regulators view. As Papandreou has shown, nothing is a done deal.

    I have been a campaigner for more years than Gill has been alive and almost as long as Neil’s next birthday. Get together , the two cohorts, and work to the common good. Aifa exists, it has form, it can change the RDR world, with a cohesive and coordinated action.

    My plea is for every IFA to join Aifa and the IFA Alliance so that those two very distinct bodies can marry their common objectives, pool their common resources (which , incidentally need strengthening – not weakening through the advent of another outlet) and take this battle to the FSA and government. The Treasury Select Committee is not finished with Sants and his arrogant unqualified inexperienced cohort just yet.

    Do I genuinely feel that another mouthpiece will help. NO.

  5. Whilst wishing to stay fully independent post RDR, I am not sure as a single IFA pratice that I am going to be allowed to do this, given the criteria set by the FSA, as it currently appears.

    Surely the key point however is not what I think on the matter, its what my clients think that will count. Although I may have to term myself ‘restricted’, my clients will remain aware that I am to almost all intents and purposes still independent, meeting the requirements to continue giving advice on a fee basis, a million miles away from ‘tied advice’. I’m therefore with AIFA on this one.

  6. “After 2012, it is simple there will be independent advisers and there will be restricted advisers full stop ” For god sake thats how it used to be and everything was fine until the labour Govt ruined things by allowing multitied and whole of market. Then the FSA had to come up with the awful idea of RDR to create another gravy train, to justify their jobs and to keep them busy for six years. All this money, our money has been wasted just to go full circle. Aifa did noting to fight RDR, no other industry would have allowed it, it has no teeth so vote for neither, its another pointless body creating pointless jobs for people, a total waste of time.

  7. I can’t help but feel that with the increasing commoditisation and convergence of products the advantages being independent offered our clients 15 or 20 years ago have pretty much evaporated for all but those with genuinely more complex needs. The de-coupling of product and remuneration will lay bare the material similarities between packaged products from most providers.

    Independence will become increasingly irrelevant as the focus will, rightly, turn towards the quality of advice rather than whether a particular plan has 200 more funds available than an alternative or projects a fund 0.5% higher in 20 years time.

    While I feel AIFA could have done a much better job representing our interests during the RDR design stage it must be appreciated that there are massive vested interests fighting in the other corners. Much has been said of the banks’ influence but lets not lose sight of the fact that insurers are now going to get their distribution free of charge and will be able to walk away from unsustainable commission arrangements.

    I think that if there is a separate association for independent advisers it will quickly become a very small club but not before it dilutes what little lobbying power the financial planning profession retains.

    In the spirit of the new world if there is felt to be a need to differentiate a better class of adviser from the riff-raff then this should surely be based on measures of quality of advice (i.e. Chartered) rather than on the number of very similar products they have access to?

  8. Is the adviser restricted by his/her tie to the products of one firm, eg bank or life office or is the adviser choosing to restrict the areas of advice covered by his/her firm but still having independence within the areas in which he/she has chosen to work. There is a massive difference between the two. The latter will still be independent but only with a small “i”. The former never will.

  9. Dennis Burling ACII APFS, Chartered Finalcial Plan 4th November 2011 at 2:44 pm

    Unfortunately for Gill I fear that the vast majority of current IFAs will be forced to convert to restricted status purely due to the extreem obligations required by the reguolator for research, CPD, time constraints etc to demonstrate that they know and can deal with all available products adequately if needed, to maintain an IFA practice.

    As such there are likely to be a lot fewer true IFAs left to represent, making this option totally unviable financially.

    In any event, as the regulator remains unaccountable to anyone other than itself, it will simply continue to ingnore us whoever steps up – waste of time by all I’m afraid to say in the UK – lets all up sticks and go abroad !!

  10. “One line, clearly drawn. Are you independent or not independent?”

    Unfortunately Gill, whilst it may be clearly drawn, as others have intimated, it is very far from clear that to remain independent will be as beneficial as you suggest.

    “Research shows clients want independent advice, in every sphere of their lives.”

    True enough, if the alternative is Tied advice, but if I choose not to advise on, say Pensions, I am a Restricted adviser, but remain free to explain that restriction to say, Investment clients, for whom I also remain free to offer a ‘whole of market’ solution.

    I thnk Gill, that you are directing your considerable skills towards fighting the wrong battle, and I agree with others that we will all be best served by those who wish their voice to be heard, ensuring that their is one strong message, rather than several, slightly different ones.

  11. I have been very vocal on these forums and in favour of IFAs & their advice. I was an IFA but due to circumstances am now restricted. I still give advice using my previous IFA principles and feel that RDR is working against these. I support SIFA in representing both HOWEVER I think they are a spent force – they didn’t step up to the plate during FSA consultations and although I was a ‘founding member’, think of AIFA as a ‘chocolate fireguard!’ I still think IFAs are the only way for customers to recieve unbiased & good advice and have been dealt a poor hand by the FSA and in poor representation by organisations like AIFA and networks.

  12. I have a great deal of respect for Gill, but very much agree with many of the posters above, including Terry O and Gerry.
    I think that Gill, is directing her considerable skills towards fighting the wrong battle.
    AIFA made some big mistakes, but they are not the enemy. Nor to some extent are staff at the F-pack, it is the system they have built which is seriously flawed.
    It is on a foundation of lies and badly thought out principles and AIFA are needed to help guide them towards correcting their ways and Adviser Alliance is needed to give them a good kick up the backside and show them that much of what they do is illegal, immoral and will not be stood for any longer.
    As to Independant v Restricted, I have done a flow chart which could show that one “Resitricted adviser” working for a NON tied firm can by more small i than a supposed “Independant” big firm.
    All clients care about is whether you are working as THEIR agent of teh agent of someone else and the way the FSA are trying to dictate to advisers, we are at risk of becoming agents of the FSA if we do not dig our heels in and say enough is enough…

  13. It’s very easy to sit and criticise AIFA for what it hasn’t done yet forget some of the benefits it has brought all adviser firms, irrespective of whether or not they are members. Governments and regulators listen when industries talk with one voice. If they hear too many views, they simply dismiss them all and get on with their own agenda. There is no point having further trade bodies; it will achieve nothing and dilute the effectiveness of what we already have. I urge all advisers to engage with AIFA to understand what it does and to put their hands in their pockets and join.

  14. I understand the desire for IFA’s to defend the hill on ‘independence’ but to create an effective association takes commitment, both politically and financially. Other professional associations have charges way in excess of the current going rate charged by AIFA of £365. The fact is most of AIFA’s income comes from Networks who are are charged a fraction of that. The result is currently AIFA depends on the financial support of Life Offices because it doesn’t have enough IFAs (or otherwise) who are prepared to put their money where their mouth is and get behind it.

  15. Lets look at the picture as a whole.
    The overall representation of Financial advice, for what ever ‘type’ of advice, is very poor.Each time a number of ‘advisors’ (and so called experts) get together to sort things out it gets worse.
    Each one has their own views on what should be done(i have been on many committess and boards where the personal views are the only ones really promoted) and it usually ends up with a compromise,until the next time, after which they have been approached with another set of views.
    This means that they end up with no real direction, and then spend all their time placating and toadying to their members.
    It is well known that the best people for the job actually never apply for it,and if you look at just who represents the Industry at all levels from FSA to the tied advisor,you can see what I mean.
    Finally to add insult to injury, we have the self opinonated experts from outside the Industry who know they can do a much better job!!
    How many companies and organisations have failed because they have ended up being run by ‘professionals’ posing as Finanacial Services experts? Confusion reigns and we continue to “suffer the slings and arrows of outrageous misinformation”

  16. Oh and another thought!
    When you look at the people who represent the Industry,and I have met many of them,would you have given them the job??

  17. I think that the industry needs one representative body, but feel in my heart of hearts that it’s too little too late.

    The government favours the banks; if anyone ever doubted that the recession should have dispelled all doubt of that. IFAP in the past did an excellent marketing job with their blue logo but in this new “social media” market we all live and work in, sadly the importance of unbiased advice, or at least that message, seems to have become less important to people along the way.

    I too will have to reluctantly give up my IFA status for all the reasons the industry already knows and I fear our once great and noble industry will be by far the poorer as a result of RDR.

    Ultimately of course it will be the consumers who are the real losers in this lunacy

  18. Yes – many clients want Independent Advice BUT if the FSA get their way those who call themselves Independent post RDR will often be no more than generalists with little specialist ability – A Jack of all trades is NOT what clients clients want.

    A practice made up of a number of specialists makes sense bur requiring every adviser to dabble in all things is not the way to go.

    So – who should represent the 5 IFAs who remain ? One of them would be my guess.

  19. The FSA’s re-categorisation places in the restricted category all tied/multi-tied advisers and those whole of market advisers who do not aspire to advise in every product area. Those in the former category have no place in AIFA but those in the latter category do. AIFA should change its rules so that it can accommodate all whole of market advisers, including specialists. If this is done, we will not need another organisation.

    Let us define ourselves by our own definitions and not by those dreamt up by the FSA.

  20. Years ago in the 90s I worked for a DBS member firm when Neil worked in the Huddersfield head office. Along with many other members I found Neil the most helpful of DBS staff. Even in those days his commitment to the IFA cause was notable. It was only after dealing with him for a few years at DBS that I realised he was the same Neil Liversidge who had campaigned for years on behalf of bikers (I have been a motorcyclist for years). He was a hard fighter and a smart fighter in that sphere also and we could not have had anybody better as our representative. Knowing him as I do it is no contest; if Neil is backing AIFA I am backing Neil and Gill, you should too if you have any sense.

  21. Talking to a regulatory body which acts like a communist style stasi policeman is an utter waste of time. You can have as many trade bodies as you like, we all need to understand that they regulators do not listen and have no interest in the stakeholders who pay their fees, they won’t apply the requirement for transparency to their RDR imposition to reveal the legality of what they are doing to us, my request for informatin has been refused under section 42 of the FOIA as the information is deemed Legally Privileged..

    What a nonsense, but I wish someone had the money to challenge the legality of this process in court, I don’t.

    If only IFAs had the ability to demonstrate the power they posssess by not submitting any retail investment business for a whole month, demonstrating their contribution to the capital markets, then someone might sit up and take notice.

    It will not matter whether you stay Whole of Market IFA or Restricted, the chances of making a profit from our endeavours will diminish and as each month goes by after 2012, the cull of advising firms and network failures will rise to the point where being an IFA will be both unprofitable and unworkable.

    Then what do we see as a way forward.


    I am not a doomsayer, just a realist and pragmatist.

    The FSA will ruin the retail investment industry at a stroke and calmly walk into their new jobs without a backward glance.

    Fimbra and Lautro worked. This won’t!

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