I have long admired Neil Liversidge. I know he does not think so, but I do. He speaks up on behalf of many “little” IFAs and does so in a style that they appreciate and love.
The fact that his views appear stuck in the 1980s is besides the point: so are those of his core target audience, making his comments the perfect echo chamber for financial advisers who bitterly regret everything that happened to them from the moment they accepted regulatory oversight by Fimbra.
So when I see a byline in Money Marketing bearing his name, I inevitably gravitate towards it, knowing I am about to learn something about the mindset of a small but important section of the IFA constituency.
Last week’s issue of the paper was no exception. In it, Neil told of how he visited a market trader, by request, at a highly unsocial time, put up with the fellow’s chain smoking and spent hours working on a product recommendation, only to be told that his potential £600 bill for going ahead was way too high.
Some months later, Neil went up to the guy as he was running his stall and inquired about buying just shy of a grand’s worth of electrical items. After the trader had stacked it all to one side, ready for collection, Neil then proceeded to ask what his profit margin was on the sale.
“What’s it to you?”, the trader asked. To which Neil replied that just as the dealer had to earn a living, so did he. Yet while insisting that Neil should disclose his earnings from the sale of the policy he had recommended, the trader was refusing to disclose his own margins. Therefore, Neil told him he would be walking away from the deal.
It is a brilliant tale, rendered all the more delicious by its finale: as Neil was leaving, the man threw a table lamp at him, but missed. I’m sure it’s all a true story. But even if it were an allegory, the moral is clear: why should advisers have to disclose the commission they earn on the sale of a financial product if chain-smoking market traders do not?
It is an interesting argument, albeit that it is 20 years too late. That particular issue was decided back in the early 1990s when a Conservative government realised competition was not keeping commission levels down. The 1994 PIA rules on commission disclosure were the end result.
What strikes me as bizarre is the fact that Neil has decided to resurrect the argument in the context of a totally separate debate to do with how much consumers should pay for advice.
He quotes the utopian romantic John Ruskin to make his point: “It is unwise to pay too much. But it is worse to pay too little. When you pay too much, you lose a little money; that is all. When you pay too little, you sometimes lose everything because the thing you bought was incapable of doing the thing it was bought to do.”
Let’s get real. The vast, overwhelming majority of consumers do not object to financial advisers earning something from the sale of a financial product. What they want to know, however, is a combination of two things: the cost to them of the advice they are receiving and what they will get for their money, both now and in the future.
They also want to know that there is some transparency in their dealings in this market. When it was first mooted in the late 1980s, disclosure was seen as part of a process of a consumer making sense of vast inequalities between charges, including commissions, for different financial products, which had varying and sometimes crippling effects on the underlying cost of what they were buying. That still remains the case.
Moreover, it was always understood such disclosure requirements came in the context of another vitally important point: the fact that for most people there is a vast difference in terms of outcomes between taking out an investment, life cover or a retirement plan and buying a fridge. One is likely to impact on a person’s entire life, the other is simply a one-off purchase costing a couple of hundred quid.
To try and compare a set of critical financial requirements with tales of dodgy market stalls seems to me to miss the point entirely – and achieves little other than to give a few reactionary readers of Money Marketing a warm glow. Reactionaries who, by the way, would have nothing to do with any other aspect of Ruskin’s progressive thinking.
If we were really to apply Neil’s logic to the situation it would work a little like this: a dealer came to see me the other day. He told me that he had an exciting tip for my pension. “What’s that,” I asked.
“Old electric cookers,” came the reply, “They’re bound to rocket in value over the next 25 years – and as it happens, I happen to have 970 of them going spare. Just two hundred grand to you, me old son.”
“Er, OK, but how much do you stand to make out of this deal?”, I inquired. “Wassit to you how much I stand to make, you e****g b*****d? Don’t you trust me?”
Nic Cicutti can be contacted via firstname.lastname@example.org