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Neil Liversidge: Independence is about more than just FCA definition

Neil Liversidge

In 1980, the typical adviser’s career path started with them joining an insurance company, before moving to an adviser firm.

Later, the more enterprising individuals might go it alone. This resulted in thousands of small firms. Their ethics and the quality of advice they offered were utterly diverse. Some were well-known and highly respected in the local financial services community; others were equally well-known as sharks and incompetents. But that did not stop insurers granting them agencies.

Regulation took a long time to bite and, for all too long, qualifications were optional.

While out walking my dogs a while back I met some old family friends I had not seen for years. These were ordinary working people who had always had it tough, doing their best on small incomes.

It sickened me to learn their finances had been ruined in the late 1980s by a so-called adviser despised throughout the Leeds financial services community as a greedy halfwit.

That had not stopped a national – and supposedly reputable – independent firm from employing him, however.

DBS checks convinced me that the network independent model is non-viable for precisely the same reasons as the large supposed independent. If the network is really doing all the compliance needed to guarantee the quality of advice, it cannot be economic.

The future of independence lies with small owner-managed firms where the owners have complete oversight and responsibility. The adviser who knows he himself must pay the price for any missale will always be more careful than the one who expects somebody else to pick up the tab.

This belief has shaped my own firm. Just before I set up, a former colleague wanted me to work “on his team”. He was an appointed representative of a cheap local mini-network. I did my due diligence and concluded it was not sound. Instead, I went it alone, founding West Riding directly authorised.

The network’s apparent cheapness was soon explained by its non-existent compliance, and the FSA later closed it down.

The same ex-colleague then asked to be our appointed representative. I declined, but later did take him on as a self-employed adviser. That was a mistake, as he pursued his self-interest to our significant detriment.

I shall never again have self-employed advisers in my firm. I want employed people who have a stake in the firm and understand that their personal success depends on our collective success through the consistent delivery of excellence. I want “we-thinkers”, not “me-thinkers”.

Some advisers will surely be more profitable by going restricted. For me, it is not about the money. For me, independence goes a lot further than the regulator’s definition. Done right, independence is self-regulating. It also means nobody owns me.

I even use an independent compliance consultant because the large service providers – like the networks that spawned them – all seek to erode their members’ independence by putting temptation in one’s way.  I am never tempted but the tempting does get boring. Freedom is not free. It is priceless.

Neil Liversidge is managing director of West Riding Personal Financial Solutions


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. This should be required reading for anyone taking on an appointed representative. It’s the most sensible thing I’ve read in the trade press for ages. Nice one, Neil.

  2. Excellent Neil. I have thought this since before the FSA 1986 and put it into practice. As an IFA, I started charging fees and eschewing commissions in 1984. Over the last ten years, Myddleton Croft Investment Managers has been owned by the people working here and will continue to be so into the next generation.
    Keep up the evangelisation.

  3. One of the more heart warming articles read this week. Sensible and after our own heart. Well expressed.

  4. Yes! Yes! Yes! Neil, I know we have had some differences in the past, but this piece could almost (with a few minor exceptions) have been written by me. I’m truly thrilled that we are so much of a mind.
    Since selling my business last year and now having done a little (a very little) consultancy – perhaps mentoring might be more appropriate – I have had my eyes well and truly opened.
    I have proof positive of what were once just suspicions and opinions. Network members are and never were truly independent and I now see that nor are/were the large firms. Independence resides with the small firms. Those who are free to fix their own tariff and who know and are deeply trusted by their clients and customers. And don’t have the production figure sword of Damocles over their heads. Invariably these smaller firms often have better qualified advisers as well. And as you so rightly say they are self-regulating, as any sanction comes directly out of the partners’ or principal’s pocket.
    Unfortunately there are still a few cowboys left in the arena, but gradually they are being weeded out. And even then, in general, they do less damage than those who go off the rails in larger firms.

    As David Cowell has said – Keep up the evangelism!

  5. Excellent sentiments, those last two paragraphs alone perfect.

  6. Nice article and some good points.

    Experience across a wide range of firms both big and small says to me this is more about the individual than the small firm/big firm debate. I’ve certainly come across many a small ‘independent’ firm that were tied in all but name. And many advisers in big firms who were vociferous defenders of ‘real’ independence and client centric to a fault.

    If your adviser has integrity and is client focussed the rest is fluff.

  7. Got to agree- I am starting out again with new IFA business and this time nobody is going to tell me what to do- consumers will come first and only great advice will be acceptable- independence is about much more than product choice so hear hear!!

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