A few years ago, a friend decided he wanted to take part in the annual Lambretta club riding championship and asked me to be his “tailgunner”, keeping him company on some 25 rallies the length and breadth of the UK and abroad.
Because this competition consumes almost every weekend for six months, not to mention many Fridays and occasional Mondays, before I agreed to my friend’s request I asked my then employer for the necessary time off.
I also mentioned my proposed involvement in this competition to a financial adviser – and fellow-scooterist. He laughed: “If you were an IFA there would be no need to ask anyone for permission, you just re-arrange your work so that you don’t see clients on the day you take off.
“In fact, I don’t know many advisers who bother to work on a Friday afternoon. Half of them are on the golf course, the other half are starting their weekends early. You won’t see them back in the office until 10am on Monday.”
Times have probably changed over the past decade and I am sure advisers have a different approach to time off. Those I speak to now say they are having to work harder and harder to justify the fees they charge clients.
Certainly, the growing use of modern communication technology means the distinction between work and leisure is blurred for many IFAs.
Not only do clients feel no qualms about contacting you at weekends but, as I have discovered, advisers often email me on a Saturday or a Sunday to make points about issues that presumably can’t wait until Monday. Clearly, some have no home lives to speak of.
What is not clear to me is the impact all this is having on IFA incomes. Over the past few days I have been trying to find out what the most recent surveys are saying about annual revenue for IFA firms and, after all costs including regulatory ones, what that translates into as an equivalent annual wage.
The problem is that there do not appear to be consistent annual surveys although some companies will ask a handful of questions as part of wider body of research, for example, the latest Aviva Adviser Barometer findings quoted in last week’s Money Marketing.
Some time ago, I vaguely remember a survey suggesting that the average income of an IFA was £60,00 to £65,000, with another survey saying a firm’s average annual turnover was in the £165,000 range, or thereabouts.
This would appear to tally with other reports I’ve read about the cost of employing paraplanners and other admin staff, paying for an office and leaving a large chunk for regulatory fees.
But what proportion of this turnover goes in regulatory fees? Here, any potential answer appears to be far murkier. Last week’s Money Marketing published the Adviser Barometer responses and if you believe the replies, almost two-thirds of advisers estimate their costs to be over 10 per cent of turnover. This was spread between one third who said it was between 10 and 14 per cent, about one in six IFAs who said it was between 15 per cent and 19 per cent of turnover; one in 10 said it was between 20 per cent and 24 per cent; and a further 6 per cent put the figure at a quarter of turnover or more.
The problem with this set of responses is that it simply cannot tally with any single and commonly agreed definition of “regulatory costs”.
Since the introduction of regulatory fees linked to turnover, the likelihood of disproportionate costs being levied on firms with high RI numbers but lower “sales productivity” has abated significantly. Plus, the average turnover quoted in the barometer research is not £165,000 but £250,000.
The only way this wide variation in figures makes sense to me is if IFAs are lumping everything into “regulatory costs”, including not just the FCA fees themselves but PI, training and CPD, compliance, FSCS and so on. If so, that can’t be the right way of looking at things.
Moreover, how can an effective comparison be made between the regulatory costs faced by solicitors and IFAs without knowing either the differences in the client base, the type of advice given or the products recommended?
Up to £150m of losses
Let’s be brutally honest here – what was the proportion of losses incurred through independent advisers involved in recommending Arch cru and Keydata products compared with solicitors?
Huge losses, mostly incurred through poor advice from IFAs: if anything should tell us why the regulatory bill for solicitors is so much lower, just look at these recent two misselling scandals – and then add in all the others over the past two decades. The irony is that, leaving aside some of the exaggerated lumping together bills that have nothing to do with regulation, the majority of compliant advisers are indeed paying a heavy burden to be under FCA scrutiny.
But it is one that has been foisted on them not by the regulator but by their so-called industry peers’ persistently poor advice. The sooner advisers focus their attention on who is really to blame for the large fees they pay, the sooner the bills will really start to come down.
Nic Cicutti can be contacted at firstname.lastname@example.org