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Nic Cicutti: Myners’ strike much ado about nothing

Many years ago, when I first started writing for Money Marketing, I remember believing all financial advisers must be exceptionally rich.

How could it be otherwise? After all, here was a group of individuals with an exceptional understanding of how markets work.

By definition, if they could advise clients how to make their money work hard for them, how much better they must be when it came to looking after their own financial affairs – or so I thought at the time.

It was only after a few years – and in the wake of meeting hundreds of advisers from all over the UK – that it gradually dawned on me most IFAs are as skint as the rest of us.

The reality is that, with a few exceptions who have done exceptionally well, for the vast majority, this is a job where you do well if you manage to hold your head above water over several decades.

Twenty years later, if I had to hazard a guess about the likely earnings of a typical IFA, I’d probably put them on a par with successful plumbers, cab drivers or electricians: comfortably off but no more. And unlike those two other occupations, IFAs don’t get the chance of nice little cash-in-hand jobs.

Which brings me to Paul Myners, briefly Financial Services Secretary during Gordon Brown’s time as Prime Minister. Lord Myners, who was also chief executive and then chairman at Gartmore, came under fire from Money Marketing readers for allegedly claiming “fund managers and intermediaries have become rich at the expense of private investors.”

Not only, but it was also claimed that while a minister he had witnessed at first hand the financial services industry’s lobbying of Gordon Brown’s government “so it could get preferential treatment – at the expense of private investors.”

Lord Myners’ comments led to financial advisers attacking him in Money Marketing, both in the paper’s printed version and online, for a range of perceived slights towards them, not least the claim that they have become fat at the expense of private investors.

Given what I have just said about IFAs’ earnings, it would be tempting to agree with Lord Myners’ critics – although why anyone should be amazed at the industry’s desire to lobby governments of all hues to its own advantage is beyond me.

Unlike Myners’ critics, I did something rather unusual last week and read his evidence to the House of Commons’ business, innovation and skills committee on February 14. His comments appear in about 27 densely-argued pages, where he is primarily responding to the Kay Review of equity markets and long-term decision-making.

And here is the thing: he did not voice his concerns in quite the way many implied. So what did he actually say?

Lord Myners central argument is that the Kay Review has failed to address what he sees as key flaws in the structure of UK corporate ownership, namely the extreme short-termism encouraged by many institutions who have little long-term interest in being “true economic owners” of the companies they hold shares in.

If they don’t like what a firm is doing, rather than behaving as activist shareholders they sell up their shares and move on to another company. “This model… works well for the fund managers and for all those who are giving advice, such as the consultants and the intermediaries.”

But it does not work well for ordinary investors, who see shares in the companies they invest in bought and sold repeatedly, with little attempt to “take a real interest in what the company is doing.” Lord Myners goes on to say: “The problem is that our big companies are now owned by share traders. They are not owned by investors.”

Now, my own reading of these comments is that while Lord Myners uses the term “intermediaries”, he is not picking on IFAs here but primarily those who are involved in buying and selling shares and others who advise them.

In pointing out that the vast majority of unit trusts – he claims the figures is 90 cent – underperform the FTSE 100 share index over periods of five years or more, his comments are something that many IFAs would agree with too. Insofar as most investors place their money in such poorly-performing funds, they lose out as a result of rapid trading in and out of individual company shares.

Now, you may agree or disagree with this analysis – I found myself at odds with his view that it was lobbying by the funds industry that led to Isa tax-saving status being offered to them alone, as opposed to individual company share ownership.

After all, pensions also have favourable tax status, including defined benefit schemes, while EIS and VCTs have always been available for individual share owners. The issue is one of risk diversification rather than focusing on single versus collective share ownership.

But the vast, vast majority of his 17,000-odd words of evidence to the committee are wholly unexceptional. Quite why anyone is getting so aerated about it is beyond me. Unless they’re fed up earning as much as plumbers and sparks..

Nic Cicutti can be contacted at


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

  1. RegulatorSaurusRex 28th February 2013 at 9:18 am


    Earns less than a plumber.

  2. “Twenty years later, if I had to hazard a guess about the likely earnings of a typical IFA, I’d probably put them on a par with successful plumbers, cab drivers or electricians: comfortably off but no more. And unlike those two other occupations, IFAs don’t get the chance of nice little cash-in-hand jobs.”

    They do now thanks to RDR. I see this as massive growth area, for the same reasons, both customer and IFA benefit from a cash job if they both keep quiet. Just like plumbers etc.

  3. I’m not sure the point you’re making when you look at the losses of banks, insurance companies, product providers over the years in comparison to many IFA’s. RDR is the last nail in the coffin for a lot of advisers and just as the candle stick maker has disappeared from the high street so it will come to pass for IFA’s who are already struggling with the cost of regulation, reduced proc fees from lenders and increased costs across the board.
    Rome burns and others fiddle.

  4. Becoming a headcase IFA 28th February 2013 at 10:44 am

    re: anonymous@ 9:59

    Most of us would certainly not condone cash transactions but it will probably go on. As I always said the crooks will find a way around any system and now it will, in some respects, be even easier for them

    Thanks again FSA

    As for Lord Myners IFAs wouldn’t get so aerated if journalist’s didn’t only provide the headline grabbing bits and print them out of context so, in this single case, Nic Cicutti has done something well.

    Myners is still a dubious individual in my book though. Somewhere between Edwina Currie and Peter Mandelson.

  5. Is Nic really commenting on the quality of his industry in the way they reported on Myners comments? Certainly they way in which his comments were reported have little resemblance to whay Nic is saying now. I do not have the time or the inclination to read 17000 word reports and rely on financial press reporting. If an adviser misleads anyone there are sanctions available, surely the press should have a similar responsibility of care and not issue such misleading comments.

  6. And here is the thing: he did not voice his concerns in quite the way many implied. So what did he actually say?
    Exactly. Journalists can say what they like. A provocative headline is all they want.
    Nic and his ilk are all the same. Provoke a reaction, whether what you are implying is true or a half truth.
    Only celebreties and politicians have the funds to challenge them.
    Hacks, the lot of them, and about as truthful as a keydata brochure.

  7. Dear Nic

    Thank you.

    At no point in my evidence to the Select Committee did I mention IFAs or anything that be so construed. I focussed on rasing questions about fund mangers and the difference beween being traders and investors. I was responding to the Kay Review, which to the best of my knowledge, did not mention IFAs either.

    So what happened hear? A headline seeking journalist puts views to well-known IFAs which she attributes to me and ask for commetns. The IFAs to whom the journalist spoke should not have done so [they know who they are and should apologise to readers] and the journalist she should be ashamed.

    To put the record straight: I have never crtiicised IFAs as a group; I take advice from a very good IFA; the RDR wil reduce consumer choice and is an initiative driven by people who think they know what is right for others and choose to ignore the views of those whose interests thye claim to have in mind. I will speak up for IFAs in Parliament. The IFA is under attack and aneeds more friends, not fewer.

    One final point: Mr Dampier makes a targetted point against me. He is incorrect. The removal of maximum charges on unit trusts was introduced by a Conservative governemnt.


    Paul Myners

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