’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in a way that is very similar to our new membership criteria, then Gill Cardy is building something that is already outdated.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