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Martin Bamford: Everyone has an agenda

A criticism that is often levelled at those who share their opinions on these pages is that they have an agenda. That we all have a vested commercial interest in the views we express should come as no surprise to anyone.

Looking at some of the recent scaremongering attached to the new definition of independent advice, it is easy to conclude that agendas are driving opinions.

The FSA is saying one thing in quite a clear and cogent manner and others appear to be placing their own interpretations on the guidance.

This should come as little surprise as there is a lot at stake, particularly for some of the bigger players in the retail financial services sector.

As we get ever closer to the implementation of the RDR on December 31, some of the scary consequences of the changes are becoming more apparent. The tide is going out and we can see who has been swimming without trunks.

Will demonstrating independence to the regulator from next year onwards really be any tougher than it is today?

Some firms believe it will be and are touting the restricted advice route as the preferred option. Other firms are committed to independence as they believe this will continue to represent the gold standard of advice. Another group is sitting on the fence until the implications of such a decision are better understood.

I suspect the decision for individual firms will be driven by a variety of considerations. What is best for the client will hopefully be the dominant factor – it should be the main consideration.

For bigger firms, the commercial aspects of the decision could play a bigger part. While the RDR should ensure greater transparency in terms of remuneration, there will also be some firms where financial considerations become the deciding factor.

Perhaps what we must accept as we move closer to December 31 is that every opinion comes with an agenda.

Some agendas are hidden while others are more visible. In every case, where business models are selected and interpretations are applied, an agenda is driving those decisions.

As for my own vested commercial interest, we are backing independence all the way. It is the closest fit not only to our existing business model but our team structure enables us to evidence independent advice in line with the latest FSA guidance and our clients really value our impartiality.

Martin Bamford is managing director of Informed Choice

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. My thoughts on this are similar to Martin’s:
    – Ignore any industry commentator who isn’t an adviser.
    – Go to FSA surgeries and listen to the FSA supervisors who have to make in this work on the ground. You’ll find they are a lot more pragmatic than the commentators say they are.

    My vested interest is that I now I can make independence work profitably post-RDR and see a massive commercial opportunity opening up with all these firms restricting themselves.

  2. “Will demonstrating independence to the regulator from next year onwards really be any tougher than it is today?”

    Martin is spot on here. In all my dealings with the FSA what they have really been interested in is whether the client received decent advice. I know that’s not a fashionable view on these pages but it has been the case in my experience.

    Are they really going to bother taking enforcement action against a small IFA who hasn’t considered UCIS for a cautious investment client. I doubt it.

  3. I accept everything Martin puts forward about IFA services being the “Gold Standard” for financial advice.

    Trouble with that view is, how much “gold ” is out there in the general population to keep us in profit.

    We are still in terminal economic decline and if things don’t improve soon, we could double dip and that is not good for anyone.

    We need small investors to keep putting money into financial products, such as investments and pension plans, which then translates into capital into the markets.

    Without that, all this fine talk is just so much hot air.

    Post RDR smaller IFAs will struggle, even those practices incorporated into networks will see their income lowered and their expenses increase with the 15% hike in FSA fees, which is absolutely ludicrous.

    My vested interest is protecting the interests of my clients until such time as I decide to retire and accept the end of my career in FS.

    Realistically as I am 63, if I don’t pass these bizarre exams prior to end 2012, then that will occur on 1/1/2013

    Still 1/2 way there now, 3 to go.

  4. Ned,
    Exams aside I actually think practices like yours will do fine going forward. Firstly I believe that IFA FSA fees are being frozen so no extra costs there.

    You can still operate on what is effectively a commission basis with the only difference being that you set the charge rather than the product provider. All this means is that you state in your client agreement that your charge is 3% + 0.5% or whatever and you’re away.

    I’m not sure many businesses will continue to operate on this ‘payment on sale’ basis but I suspect for a long established firm with clients that are used to this, you will be fine.

  5. Im posting this one anonomously, as I have no wish to drop the FSA chaps in it!
    I raised at a recent FSA surgery that in terms of those “products” that must be considered in order to remain independent, I couldnt see anything in the rules that limits them to UK products. The two FSA people there couldnt identify it either.
    Does anyone know specifically in which section of the rules the limitations are defined? Presumably the absence of such a restriction would imply there is no restriction and it would naturally follow therefore that we have to consider all worldwide products to remain independent? ie in practical terms, nigh on impossible.

  6. I think most will be OK next year. There are some countries in the world where sales commissions are banned for financial products, and have been for many many years. Fear not, the good ones will survive and prosper.

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