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Naked truth about industry proposals

The tale of the emperor&#39s new clothes sprang to mind last week as I watched the posturing by the Investment Management Association as the brave in its midst came back from holiday and launched into an attack on Sandler&#39s conclusions regarding active fund management.

The initial timidity of our industry perhaps explains why we are in the position of having to endure review after review. This prevents any sensible strategic planning from taking place and all this at a time when we are witnessing margins moving towards zero.

Similar posturing is evident over the detail of Aifa&#39s alternative to the defined-payment system. Aifa has referred to a tariff for services and a method for justifying the cost of advice and so on but has yet to make public the draft documentation. Without the full documentation and process being publicised, any meaningful analysis of its impact and effectiveness is impossible.

I have serious concerns that the lack of detail regarding Aifa&#39s proposal means that this possible alternative has received support which may evaporate in the cold light of day if it proves to be unacceptable to all but those on a fee basis at present. Time is short and we need to look at all the alternatives and then take consumer feedback to support the way forward.

Talking about something which has not been seen will lead to problems, just as it did for those to scared to speak up at the time to the afore-mentioned emperor.

The problem of VAT on advice fees was obviously taken on board in the Sand-ler review, with the option of the charge being contingent on a product purchase representing the considered response to this issue.

Recent suggestions that VAT could be removed on fees where no product purchase takes place ignore the fact that the place to lobby for this is Brussels and not London.

Removing VAT on financial advice is not going to happen, as other professionals such as solicitors, accountants and even actuaries could argue that they, too, should be able to avoid VAT.

In any event, the EU would not allow such a move to take place and can I therefore ask those raising it to desist and to put their efforts to better use?

Ultimately, clients will pay for advice on a fee basis if they can see the value in that advice.

To prove competence, exams are the least imperfect solution. IFAs also need to believe in their own value, with that value/quality being assessed in relation to their peers. Just as I believe the networks are yesterday&#39s solution to a particular problem, I believe that alternatives will emerge and the future shape of the market may alter, making this type of market intelligence highly valued in the future.

Pickering and Sandler had one thing in common – they covered a lot of ground but were short on detail as to how their proposals should be put into effect. This lack of depth gives the regulator maximum flexibility in how it moves forward, allowing for cherry-picking or dismissal of the proposals in their entirety.

The industry is being asked to look at its new clothes while much of the garment is still invisible. We need to make it clear to the public and Government alike that we cannot support the need to address the savings gap unless the market is much better defined. Furthermore, the preoccupation over cheap charges is best parked in the same compound as an indecent love for all things tracker.

By the time that the son of CP121 is published, we must ensure that the public understands the value of advice and the effectiveness of the professional IFA. Without this, the market for many IFAs will be as visible as the emperor&#39s new clothes.

Robert Reid is principal of Syndaxi Financial Planning. He can be contacted via email c/o the editor at


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