View more on these topics

Menu edge

The FSA&#39s proposed “menu for being open with customers” has laudable objectives.

The FSA wants consumers 1) to understand the cost of advice, 2) to understand the various options when paying for advice, and 3) to shop around for the best deal.

I believe the proposed changes will be much more effective in achieving the first two of these objectives than in achieving the third.

IFAs, and indeed multi-tied advisers, will set out a key facts document, a guide to the cost of our services, summarising the advice options (fee and, if appropriate, commission bases offered) to the client before any advice is provided. This document will drive a focus on the type of service being offered by the adviser and how it is paid for – potentially a great shop window for IFAs.

For example, to what extent is the service offered a one-off financial planning review where up-front lump sum commission might be appropriate? Or is it an ongoing review of asset allocation, fund performance and investment manager, in which case fund-based commission might be preferred both by adviser and client?

The latter is an area where we see an increasing focus as many more IFAs concentrate on asset allocation – filling a space historically taken up by life offices.

The new guide provides an opportunity for IFAs to discuss these services – the alternative of trail commission in particular will lead advisers to use ongoing investment advice as a source of added value in the client relationship.

Also proposed is the publication of market average levels of commission alongside the maximum published by the IFA. These will be calculated by the FSA and reviewed annually based on questionnaires sent out to product providers in March.

One has to question whether this is a degree of disclosure too far. How much information can consumers digest at one time and can they make a value judgement based on this? Given the range of different advice models offered, will consumers know what average represents?

Turning to the question of whether customers will shop around more as a result of the new proposals, there are two elements – a) will they shop around between sectors (IFA, multi-tied, tied) and b) once decided on, say, tied will they shop around within that sector?

Although tied advisers are remunerated differently from each other, they will have to, under the proposals, disclose costs based on commission equivalents similar to those currently disclosed at point of sale. These figures take into account a broad range of costs and are difficult to compare with IFA commission/fees.

Given the different ways that relationships are structured and the different sorts of service offered, it seems unlikely that many consumers will, on the back of the new guide, move between the IFA, tied and multi-tied sectors.

Once the client has deci-ded that he is comfortable with, for example, tied advice at his local bank branch will the new guide encourage him to visit other banks on his local high street to assess relative costs? It seems unlikely, given the effort involved and the fact that cost is only one element in the value chain.

I would question, therefore, whether enough consumers will shop around to actually make much difference to the FSA.

However, discussion between client and IFA of the different charging options avail- able and the details of the various services offered will be a powerful endorsement of the flexibility of the IFA service.

So, two out of three ain&#39t bad and after a long and hard journey the FSA&#39s menu system looks like it will help take our industry one big step towards a better future.

George Andrew is head of industry relations at Scottish Widows

Recommended

BM launches switching option for buy-to-let

BM Solutions has launched a fee free switch option with its base rate tracker. Borrowers are able to switch from the tracker rate, which is at base rate plus 1.99 per cent, to any product in BM&#39s buy-to-let range at any time during the life of the product. Senior product manager John Bianco says: “The […]

Networks Regulatory Forum formed by six networks

The Networks Regulatory Forum has been set up and aims to share regulatory and relevant experiences to help members comply with the FSA&#39s requirements for mortgage and general insurance regulation. The NRF&#39s founder members are Paymentshield compliance director Ann-Marie Stone, Countrywide Assured Financial Services compliance manager Sharon Glay, BDS Mortgage Group group compliance manager Bruce […]

Product matters

The VCT market will be fairly small this year, hence the preponderance of small top-up VCTs rather than brand new launches. Electra Kingsway is fairly typical of this and is looking to raise just over £2m. First, I would say that this is entirely sensible. I would find it difficult to back a new launch […]

Review lists viable film schemes

The latest issue of the Tax Efficient Review details all the film partnership schemes still claiming to be viable following the Inland Revenue&#39s bombshell last month. The Revenue introduced guidelines banning certain types of schemes from raising funds because it objected to the profit-sharing ratios between producers and their members. These schemes include Scene from […]

Global income: preparing for a rate rise…

In the five years since we launched the Artemis Global Income Fund, its manager Jacob de Tusch-Lec has built a distinctive portfolio that is first among its peers. Here he explains why his “quality, cyclical and value yield” stocks, and flexible approach, leave the fund better placed to benefit from uncertainty than funds that depend […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com