View more on these topics

Menu edge

Consumerism is a very powerful influence on all we do and we ignore it at our peril. Value for money is clearly in the spotlight in this respect.

To date, it has been very difficult in the world of financial services for the public to understand what is, after all, quite a complex situation, but it is worth reflecting on the fact that, despite these difficulties, consumerism is already driving out front-end-loaded products with high initial commission.

In this challenging marketplace, IFAs have achieved over 60 per cent market share, which has been the envy of other distribution models such as direct sales and tied agents. These have experienced rapid decline as seen by the withdrawal from this sector by many leading players.

The reason is quite simple. Direct salesforces and tied agents have historically been more expensive. Consequently, the premium loadings, without subsidies to achieve comparability with IFA distribution, would have made them very unattractive if reflected in the pricing of the products being sold.

Against this backcloth, some two years after the original debate on depolarisation started, we now have the current proposals outlining a more open form of disclosure to help the consumer understand the costs and the implications of the advice being given. Only time will tell whether this concept will achieve its objective, or as many similar initiatives in the past will fail due to its sheer complexity.

We have come a long way from the abyss of despair contained in some of the original proposals of the defined-payment scheme, which meant quite simply that the IFA could not be remunerated by commission despite the fact that the research was telling us that the consumer was not, in the main, prepared to pay fees.

I therefore do see considerable merits for the IFA with the current proposals. For the first time the consumer will know the cost of the advice that he is being given, in comparison to the relative costs for IFAs, tied agents and direct salesforces.

Clearly, this must be significantly to the advantage of independent financial advice. For the first time, it will have to be spelt out how costly the alternatives are and, in addition, the narrowness of some of the product offerings and consumer choice restrictions will be plain to see.

Within the proposed regulations on depolarisation, there will also be opportunities for IFAs to expand their current services into areas which may not have been cost-effective before. The menu approach, coupled with depolarisation will enable IFAs to re-engineer their business to cover all aspects of clients needs from the high-net-worth end of the spectrum, where much of the focus has been, to date, down to simple protection commodity products, where limited advice is appropriate.

Most important, the IFA starts from a position which is the envy of all other distribution models. Clients have consistently liked and bought from the services we provided.

What the future holds can only improve on that position. We are not faceless individuals within large banking groups, we have a clear relationship with our clients who trust and respect the need to formalise the value for money our tried and tested formula offers and this can only add to the professionalism that is the hallmark of our services.

Some of the objectives will not succeed but I do not believe that our clients will want to shop around if they respect and value the advice that we are giving. It is unlikely that tied agents and direct salesforces will enjoy such benefits from this new regime. There is much consultation still to take place and we have until June 1 to make sure that our concerns with the current proposals are well made.

Aifa, as it has proved when it came up with the menu concept as an alternative to the defined-payment scheme, has been very successful in this respect. We need to resolve burning issues, such as the complexity of the current disclosure regime and the resulting turn off to the consumer.

Barry Kayes is chairman of Tenet


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 […]

NAO says Treasury numbers affected by lifetime limit

The National Audit Office says the Treasury&#39s estimate of the numbers likely to be affected by the £1.4m lifetime limit is only half the figure it thinks will be hit.Th NAO also says there is a “thin evidential base” for the Treasury&#39s estimate of a further 1,000 people a year affected by the limit that […]

Barclays banks on combination deal

Barclays is developing a proposition for customers approaching retirement that will combine the bank&#39s products with offers from third parties. It is looking into offering equity release, long-term care, investment planning and tax planning either through third parties or by itself. The project is in the early stages but Barclays says it could include a […]

Treasury should recognise industry&#39s progress

The Association of British Insurers is disappointed the Treasury select committee&#39s report into endowment misselling does not recognise extensive changes in the industry and regulation, and does not focus on how to boost savings in the future. ABI&#39s director general Mary Francis says the industry has made clear its regret that customer communications and sales […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    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