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Nic Cicutti: The attraction of simple products

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I have been called many things over the years and I can genuinely say that I don’t mind most of them one bit. But the one thing I have problems with is being told that I don’t like IFAs or their trade bodies.

In fact, I hold independent advisers in profound admiration. There are some whom I like a lot. They offer sound advice, deftly dealing with clients’ many issues and problems – which often have nothing to do with money matters – to create order out of financial chaos.

I also appreciate the earthy humour, the willingness to engage in debate, even the protestations of innocence on behalf of their profession. Most of all, I love conversions on the road to Damascus.

As for trade bodies, while I may not generally like their direction of travel or their current effectiveness, I want them to be as strong and vocal as possible. IFAs need a voice in the corridors of power. And every now and then, someone offers to provide it.

Take, for example, the case of Robert Sinclair. As readers will know, Robert is chief executive at the Association of Mortgage Intermediaries, which broke from Aifa just over a year ago.

In the nine years that the AMI was part of Aifa, I never had cause to speak to Robert. Although a senior figure in the merged organisation, interviews at Aifa were always handled by Chris Cummings, David Severn or Paul Smee.

It was only after the split that I read anything noteworthy from Robert. I wasn’t that impressed: six months ago, he allowed himself and the AMI to be roped in with the ABI to press for a “basic advice plus” regime that would have allowed salespeople with a QCF Level 3 qualification to sell “simple” products, such as protection.

Robert’s press release talked of “the social issues of a pensions time bomb, the recognised saving and protection gap and the loss of mass-market advice to middle income groups by the closure of the tied advice arms of most of the major banks”.

I took a slightly different view on the proposal, seeing it as a last-ditch pre-RDR bid by the AMI to allow its under-qualified members to sell non-mortgage products.

To the best of my knowledge, that idea bit the dust and was never heard of again. But strangely enough, I found myself admiring the person who had voiced it. After all, you can’t help but respect a blatant declaration of self-interest, even if it is dressed up to look like it’s all for consumers’ benefit.

Which explains why I now find myself keeping an eye out for Robert’s various utterings, trying to work out if there is a deeper meaning to what he is proposing.

Last week was a case in point. In an article for Money Marketing nominally about how financial advisers should see off claims management companies – music to the ears of Neil Liversidge and Alan Lakey – Robert then advanced a novel idea: why not sell simple, no-nonsense products?

I say it’s a novel idea. In fact it is anything but. The notion that the vast majority of consumers don’t need the plethora of complicated and expensive products often foisted on them is hardly new. Some of us have been voicing the same concept for the best part of 20 years.

Still, it’s good to see such a Damascene transformation from a senior public figure on the financial scene.

What I like most of all is the unprecedented connection between a trade body chief and the exhortation to sell simple products. Going back through the publicly quoted remarks from previous senior figures within Aifa, for example, I do not recall any former chief executive ever uttering a single word about the products their members should be selling.

As Robert says in his Money Marketing article: “Customers come to us expecting that we do not follow the money or the cutest marketing gimmick. Our expertise and our integrity is what sets us apart from the rest.

“Our customers want us to de-mystify and tell them what is best for them. Good advice around simple solutions is what stands the test of time.”

It all sounds marvelous. So I hope this isn’t a back-door attempt by Robert and the AMI to place the discredited concept of simplified advice back on the agenda.

After all, simplicity is actually the hallmark of the most sophisticated of advisers. It is also what most consumers crave. Yet simple products, ironically, are precisely what the banks and their tied arms consistently failed to deliver, proving that you can missell the most appalling and complex products using the simplest language imaginable. All you need to be is economical with the truth.

Still, let’s give Robert the benefit of the doubt.

Yet that still raises the question of why he would wish to discuss the question of financial products other than mortgages in a Money Marketing column.

Yes, I know that AMI members don’t just advise on home loans but one might have thought that, having split from an organisation that represented members on the wider aspects of financial advice, Robert would have wanted to steer clear of non-mortgage topics.

Unless, of course, his column was also a job application. Any vacancies out there?

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. Simple products are very difficult to create. Mostly because when authorities talk about “simple” they mostly mean “cheap” and the two are very different animals indeed.

    Take stakeholder pensions as an example, and an entertaining example at that, because they turned out to be neither “simple” (trying explaining the benefit regime to an ordinary person and you will see why) or cheap.

    So, yes in theory simple sounds good, in practice you would probably have to change the entire UK tax system to enable simple to exist

  2. There is a massive hoax that some are trying to perpetrate on the consumer and the adviser community.

    The fundamental lie that if a ‘simple’ product exists it will encourage mass purchasing by consumers.

    Let me tell you, they really couldn’t care less.

    Financial services is tedious to most consumers and they interact when they have to or…when they are persuaded to.

    And by the way Nic, you were always antagonistic towards Adviser Alliance and the IFA Defence Union. I cannot recall any cosy columns advancing their membership ambitions or policies.

  3. Life cover is simple and it is straighforward enough to get the right cover.
    But at Dunbar there was a saying about life cover – right money, right hands, right time. The last two are the difficult bit.
    Best protection plan is PHI. It is a pig to broke and can be very complex.
    Simple usually means cheap, cheerful and often failing to do what it is thought it should do e.g. PPI.
    But then who will be around to give proper affordable advice to the masses?

  4. Scott Taylor-Barr 9th May 2013 at 12:10 pm

    I think Sam makes a good point – PPI was a “simple” PHI contract and look what happened!

    Simple is one of those words that means a million different things to a million different people, but one thing is for sure – to make something simple there will have to be a compromise somewhere, where that compromise lies is the killer question….

  5. Simon Webster 9th May 2013 at 12:16 pm

    Life insurance as a concept is a doddle. But you always still need to consider: waiver, sum assured, term insured & trusts oh and whether FIB or relevant life would be more appropriate…so non FS professionals really do need advice or they risk mis-buying. Of course we could “dumb it down” so everyone only gets 20 year level term with waiver and no trust -but is that really a consumer benefit?

    Simple products are great in theory but rarely (if ever) work in practice; as Nick B already said ShP was an obvious example. But in fact if we applied your suggestion more widely Nic we would not need columnists ether – many of us could write our own (and indeed do) but we chose to do other things with our time – as do clients when sourcing financial products – which is why the wise one take advice.

  6. Nic, it is worth looking a little further than the end of your nose when considering simple products. These regimes work well enough in other countries, Australia is a good example, go look.

    It’s not the products that are the problem it’s the system in which they have to operate.

    I don’t think it’s feasible here unless regulation and the general financial services environment is simplified. .. and that would have to include tax as well.

    This would require a total overhaul. As much as it would be better for all I can’t see it happening any time soon. Or later for that matter.

  7. Our industry has for years delighted in making simple things complicated,whether that is plan design,charging structures or legislation,we have been very good at it.Generally its been the advisers role to turn this into something ‘simple’ that a client can understand.But the issue is not about simple v complicated products,and never will be.A term assuranve is a simple plan, but when its applied to a business it becomes much more complicated.So its really about matching the advice to the clients circumstances ,sometimes that will involve simple products ,such as mortgage protection ,but at other times it may be a life policy in trust for IHT.Simplifying advice has been tried many times with decision trees and and flow charts etc ,but at the end of the day it comes back to basic finacial planning and the ability of the adviser to assess, analyse and summaries what the clients needs actually are.The policy is purely secondary consideration and may be simple or complicated, cheap or expensive,thats the job isn’t it?

  8. Even if you advised on ‘simple’ products you could still fall foul of being accused of bad advice.

    Life cover in or out of trust and what trust to use – suddenly aint so simple.

  9. Nic

    I see that you and Robert seem to have missed the point of RDR and that is that advice charges are no longer a part of products in the investment and pensions arena.

    So, there is no such thing as simplified products due to the fact that advisers no longer receive commission. What the client is paying for is advice doesn’t matter whether it is a simple product or a complicated products the actual thing that the client is paying for is advice.

    In the long term this will have a dramatic effect on product charges as advisers will be looking for providers who offer value for money as well as performance and client friendly options.

    The idea of RDR was to make sure that product providers were not effectively altering and enhancing commission levels to attract business, they can only now do this by the quality of the product.

    Very surprised that the quality of this article as we are now four months in to RDR and I would have thought that this particular penny would have dropped by now.

  10. I f a client does not have any protection at all ( GENERALLY QUITE RARE)it might be relatively simple to put appropriate cover in place , however if they have existing plans with options, or benefits from their Employer or family complications etc it is never wise to look at these situations in simple terms as the client will end up with overlapping cover or benfits that they actually require not being put in place or even discussed as the adviser never considered the options. Simple it is not!

  11. The protection and trusts element of advice is actually more complicated than investment itself. The complicated bits of pensions (a trust) are the rules and not the investment of the money where 50% will under perform and 50% will over perform their benchmark at any given time……

    RDR didn’t address the issue of protection when anyone who claims to be an “adviser” may be leaving themselves massivly open to complaints where their FCA authorisation includes advice on protection and they only focus on investment and pension advice.

  12. @Alan Lakey: TBH, I’ve always seen IFADU and the Adviser Alliance as a poor practical joke perpetrated on the IFA community. And, in my experience at least, the vast majority of the IFA community felt likewise….

  13. Yes, Nic.

    I’ve always realised that let your political views influence your writings.

    However the RDR fiasco has proven both bodies right when AIFA, the ABI, yourself and others all buffed it up and presented it as a way forward.

    Hang your head in shame.

  14. Well said Alan.
    I do not see you or adviser alliance as a practical joke at all.
    Nic on the other hand……

  15. Cicutti/Lakey.

    Can’t you two sort this out in the playground at lunchtime? I can’t believe for a second that I am the only person who USED TO find the MM website a useful portal for both gathering information and sharing ideas.
    Now we continually have to wade through your childish tripe before finding anything of real substance.

    You’re both an embarrassment to your (alleged) professions.

  16. Captain Codpiece 15th June 2013 at 7:48 pm

    Buuurrrrr……………….ah, that’s better.

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