View more on these topics

MM podcast: Alan Lakey Vs Pillaged! author David Craig



Adviser Alliance founder Alan Lakey and Pillaged! author David Craig discuss the costs and benefits of advice and whether regulators have made things better or worse.

Craig’s book, Pillaged!, claims big beasts in the financial services jungle syphon £413m a day or £105bn a year out of people’s savings. Before turning his hand to writing David worked for 20 years as a management consultant.

Highclere Financial Services partner Alan Lakey is a regular contributor to Money Marketing and has been an IFA for 20 years. Before forming Highclere he spent 13 years working in other advice firms and insurance companies.

Here are a few highlights from the podcast:

On Advice:

Craig: “There are too many people in the market, too many IFAs offering their services and a bit of a cull would be a good thing. If there were fewer advisers, there would be less pressure on them to sell and they would have the time to give a better service.”

Lakey: “I absolutely disagree. 20 years ago there were over 250,000 advisers. It cannot be coincidence that as that number declined, the savings and protection gap has widened.”

On costs:

Craig: “Of the £105bn a year financial services costs people each year, I estimate the total cost of advisers to consumers is around £3bn a year, £100,000 each, and I think this is too high.”

Lakey: “This is the costs to the adviser, what it will cost him to survive, so we are not talking about a rip off but a natural consequence of the industry. My office costs £48,000 a year to run, If I earn £100,000 that leaves me £52,000, and I pay tax on that.”

On regulators:

Craig: “Testing for my book I made several complaints to the FSA about things my pension fund had done and the arrogance and total bureaucracy of the brush off was unbelievable. Our regulators have been worse than useless.”

Lakey: “There is the imposition of fees, the regulatory weight we have to operate under and products that perhaps are not the best for the client, but designed around the regulatory framework. So a big body of evidence suggests consumers are no better off because of regulation.”

If there are any head to head debates you would like to hear in a future podcast, please contact the news team.


News and expert analysis straight to your inbox

Sign up


There are 16 comments at the moment, we would love to hear your opinion too.

  1. Perhaps craig should be culled for being ignorant as to who are the “big beasts” in the financial world. It is certainly not IFAs’ who are bottom of the food chain and are vulnerable to all sorts of predators. Someone should send him a copy of The Leviathan at Large.

  2. Craig is ill informed. 105Bn per year is a very small proportion of the total fs market. He is alos very badly informed on what financial services actually does. In any event our costs are far to high because of reg-yew-lay-shun, not despite it.

  3. Where can one view the pod cast?

  4. Craig needs to spend a month within a small IFA office working and seeiong what we actually do. plonker

  5. paolo standerwick 18th August 2011 at 3:58 pm

    The money eating up clients investments come from provider charges, not IFAs.

    The IFAs are cheap by comparison. I’d swap any day my clients commissions/fees to provider commissions/fees. In which case I could have retired years ago.

  6. John Bloomfield 18th August 2011 at 4:01 pm

    It seemed that everytime david was questioned about his numbers or in fact anything his most used word was “assumption” or other derivative.

    He doesn’t seem to see the relationship between the UK having the most heavy handed regulation and being the most expensive in several industries.

    Can’t believe he even found a publisher.

  7. His numbers flawed.

    Assuming his 105Bn is correct that’s between 1% and 3% of UK savings balances, including stock market and sterling bond market holdings.

  8. I would questions Craig’s judgement on many levels, not least his inability to secure the services of a good IFA.

  9. David Craig doesn’t exactly come across as having over-researched his subject and the statistic he produces seem designed to be alarmist rather than accurate or meaningful.
    Alan Lakey, on the other hand, rebuts the author’s nonsense very well.
    Craig acknowledges most consumers are unlikely to be able (or willing) to do the necessary research but fails to draw the obvious conclusion that they might need to seek advice from someone who is qualified. He seems to hold the childish notiion that good advice come free from the sky, since he clearly doesn’t appreciate the welter of regulation IFAs need to comply with and the cost burden that entails.
    If any group needs to be “culled”, arrogant sensationalist authors are of rather less benefit to consumers seeking advice than experienced, qualified IFAs.

  10. That is a disgraceful comment from Craig perhaps both he and his book should be flushed down the pan.Has he considered for one moment anything other than making money from his book l dont think so….. Alan you can do better than waste your time with this.

  11. Craig is a complete amateur. What utter tripe.

    I heard that a large supermarket chain has ordered all the copies it can getn its hands on.

    I also heard they’re clearing the mother of all spaces in the section marked ‘TOILET PAPER’

  12. It comes to something when a Management Consultant criticises IFAs for charging too much!

  13. Craig is a sensationalist author who has written other ‘shock, horror’ books such as Plundering The Public Sector, Fleeced, Rip Off & Squandered.

    As with most of these guys his knowledge is shallow and his opinions deep.

  14. “David worked for 20 years as a management consultant.”

    A yes..

    I recently brought a book entitled CON TRICKS which was written by an ex business consultant and is designed to help businessmen gain an insight into the way in which that industry works, the tricks they use and how you can recognize when you’re being taken for a ride.

    Anyway you can imagine my surprise when reading the chapter TRICKS OF THE TRADE when I see a quote attributed to none other than Howard Davies who once worked for McKinsey’s (apparently one of the world’s largest and best known business management consultants) which said, and I quote…

    Finally, a thought to remember from Howard Davies, a former McKinsey man who became the Deputy Governor of the Bank of England:

    “ I found it hard to understand why my clients were prepared to pay decent money to employ someone who knew so much less about their business than they did”

    Perhaps he knew a few tricks.

  15. I appreciate that this article is a summary put it still highlights the stunning level of non-information upon which the current industry changes are based. I almost said reforms, but frankly it is impossible to classify them as reforms, merely changes. Reforms imply an improvement; there is no evidence presented by any party that there will be an improvement for consumers as a group. There is research, not finance industry specific, that suggests the probability of the changes being beneficial are lower than 50%, or to be blunt, that they will do more harm than good.

    Firstly, David Craig appears to be using the term Adviser and IFA interchangeably, just like the FSA and the FOS. For example, there is no entry for tied agents in any of the FOS reports over the last 10 years; every adviser complaint is against an IFA – except that St James Place have had 35 new recorded complaints in the latest statistics – so what category do they come under – Elephants?. [It should be noted that the latest FOS annual report states: “The proportion of cases involving …independent financial advisers continued to decline (by25%)…)”; so how much change is required if the problem is vanishing by itself. There is no breakdown in the either David Craig’s analysis, the FOS’s or FSA’s as to the proportion of complaints against IFA and non-IFA advisers respectively. How can one tackle a problem if it hasn’t been defined correctly?

    Secondly, on what basis does David Craig contrive the statement that there would be less pressure to sell and more time for better service. Any comment here must be related to the lack of figures mentioned above. If a high percentage of “advisers” are employed by banks, then it could be argued that there could be a higher level of pressure to sell to maintain overall income and profitability targets. And would banks offer an mass advice service as opposed to a sales service? What effect would this have on the market?

    On what information is the assumption of “better service” built. If there are fewer advisers in an expanding population it is just as easy to conjecture that a diminution of “advisers” increases the adviser workload, and thus decrease service standards. One consequence of this could be to look for an easier solution, namely sell and move on quickly. This is as logical an assumption as David Craig’s, though again without specific research to provide substance to the debate.

    Thirdly, how does David Craig arrive at his estimate of £3bn going to advisers, and in what spread between IFAs, tied, multi-tied and Banks/Building Societies. I estimate that the cost of compliance to consumers, including the FSA, FOS, and all the compliance departments is around £5bn. On this basis it is costing clients more to be “safeguarded” than they are actually paying for advice. A curious effect. Add to that the “fact” that the FSA only assesses client detriment in the order of £500m. Add to that the truism that poor, negligent and fraudulent advice will never, ever be eradicated (it hasn’t in any other walk of life, so why should financial advice be the exception, other than in the minds of the mentally challenged). How much improvement can we realistically expect? 50% equivalent to an improvement of £250m; 60% equivalent to £300m. And how much is is costing the consumer to save that amount? £5bn a year? Work out the figures any way you want, but frankly RDR and the sanctimonious ramblings of people like David Craig are costing consumers a disproportionate amount of money. Not that David Craig or the FSA would worry since creating dissatisfaction is keeping them in a comfortable living. Conflict of interest?

    Fourthly, there are figures floating around somewhere, and I know some kind person will divulge them, that indicates that the average level of remuneration for IFAs is below £40,000 p.a. Is Mr Craig implying that people are likely to study for a high level of qualification, endure a harsh and arbitrary regulatory environment, and carry the costs levels currently envisaged, for a remuneration level at or lower than £40,000. If he and clients want quality, they must pay for it. If anything, Mr Craig’s figures indicates that advisers, on average, are being grossly underpaid. If Mr Craig is saying that advisers should be on remuneration levels more akin to accountants, solicitors and fund managers, then he would then have to accommodate the fact that prices will rise beyond the levels he is currently ranting about. I would also add that research I did many years ago demonstrated that the costs of products were split around 1/3rd to commission and 2/3rds to provider administration. How little we hear about provider costs.

    Fifthly, I do believe that we can all join with Mr Craig in questioning the attitude and competence of the current Regulatory Regime. What is bizarre is that so much energy and attention is directed at the regulated and so little at the regulator. And there is no discussion of the structure of the market, either existing or desired. The FSA and commentators talk only about advisers and their activities. What about directing attention at consumers and their activities. Does the structure being created by a Government Quango actually reflect the needs and requirements of the consumer, or just a small portion of those consumers? Does it encourage innovation and competition? Does it reflect modern retail and communication trends? Or is it embedded in a structure that is now 20 years out of date?

    A real problem with Mr Craig’s current stance is that it appears to reflect fairly accurately the attitude of the FSA and the media, but carries so little factual information that the changes are indeed being “built on a foundation of sand”. If that is actually quick sand then we can reasonably surmise that the IFA sector will soon be little more than a memory – but no-one is conjecturing on what may arise in its place. Sometimes it may even be better the devil you know!

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