To its detractors, it is the latest example of a Government stomping
willy-nilly over the decaying corpse of financial advice. A hopeless
example of ministerial arrogance and naivety. Catmarks for financial
advice. Whatever will they think of next?
Let us look at Catmarks in the round.It has not always looked that way but
this Government has always had a rather clear agenda when it comes to
financial services and no, for the paranoid tendency among the IFA
community, that is not the elimination of independent financial advisers.
The agenda has actually been to bring down the cost of financial services
for the consumer, to stop them being ripped off and, by the by, restore
confidence in the industry. No really, it's true.
Ministers have no interest in destroying this industry because they need
it far too much. It is the measures they have taken towards achieving these
aims which are open to question.
In the field of pensions, they have treated the industry like a utility
and imposed price controls. The result is the stakeholder pension which has
a compulsory Catmark. Only time will tell whether this will work.
Elsewhere, the tactic has been to introduce voluntary Catmarks.
This has not been the greatest of successes. There are very few Isa
providers that have bothered with them, even where they have products which
There have been all sorts of arguments against them but the most powerful
one is they would be misinterpreted as some sort of Government guarantee as
to the performance of an equity-linked product – that Catmarks would become
confused with kitemarks. These fears have been groundless.
There have been any number of surveys which have shown the public
awareness of Catmarks is, well, pretty minimal. Far from mistaking them for
a guarantee, most punters have no idea what they are.
Nonetheless, just in case there was any doubt, I took a wander around
Norwich Union's website before writing this. NU is unusual in actively
promoting Catmarks. It even has a number of active managed funds which
boast them. Whether these make a profit or not, I have no idea, but the
company's results have been looking decent enough.
Having looked at the site,I do not believe anyone could come away with the
impression that a Catmark was some sort of guarantee of performance. The
explanation of what they are was remarkably clear and cogent, something
this industry has not always excelled at.
The explanation would, in fact, tell me that a Catmark, while interesting,
was not really something I should be bothering about too much.
In terms of the Government's aims, it has done very little. It is not
compulsory so most fund managers have ignored it. But advice, well that is
something different, isn't it? Not necessarily.
I fail to see the harm in setting out some basic criteria for a visit to a
If set up right, it could even be a godsend. As Garry Heath intimated in a
recent issue of Money Marketing, the term “independent financial adviser”
is not one which conjures great confidence in the mind of the public at the
moment.A Catmark scheme could change that.
A sensible scheme might posit Mr and Mrs Smith walking into the IFA for
the first time for a financial healthcheck. They are told that the IFA has
a Government Cat standard. This means they can expect to get X and Y for no
more than cost Z. If they want more, it can be discussed afterwards.
Such a scheme may even be able to be used to introduce the idea of
charging a small fee for the healthcheck and help to get the public used to
paying fees for financial advice, which would be no bad thing.
Of course, that is a very idealised view. As I have said, the Government's
Catmark scheme for Isas has not been a roaring success.
It is too prescriptive, the charges it enables a company to levy are just
that little bit too low to allow for anything other than plain vanilla
products to come under its aegis. This a major reason for fund managers
ignoring it and a major reason that it has had little or no effect on the
majority of Isa pricing.
There are grave dangers that the Government's scheme for Catmarked
financial advice will make the same mistakes. But in that case what is all
the worry about? The IFA community will be able to do exactly what the fund
management industry has done and ignore it.
James Moore is a finance reporter on The Times