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Nic Cicutti: The root of IFA prejudice

Last week’s open letter from Money Marketing editor Paul McMillan to Paul Lewis, responding to a passionate exchange of views between the latter and recent Aifa council recruit Neil Liversidge, capped a fantastic correspondence between all three parties.

What was so good was not only Neil’s anger at the way he felt his industry is being demonised in the media, but – I would say this wouldn’t I – the way Paul Lewis was not only willing to engage with him but also in the process factually skewered many of Neil’s comments.

For example, on the issue of Northern Rock, where Neil claimed Money Box had not tried to tell people that the bank’s effective nationalisation made it a haven for savers’ cash, Paul proved the opposite was true.

Paul Lewis also pointed out that the “debate” demanded by Neil over Ivan Massow’s new trail commission-rebating service had, in fact, already taken place on Money Box the previous week, with Brian Dennehy there to represent IFAs. Neil probably felt he should have been there instead.

All in all, I really enjoyed the debate between Neil and Paul. What made it even more interesting was McMillan’s own open letter. In many ways, this last acted as the prequel to the main act, explaining why it is that so many IFAs feel angry about the way their industry is constantly under attack.

Where I felt McMillan was a little weak was in his attempted demolition of the claim made by Lewis to the effect that trail, commission was “one of the industry’s best-kept secrets”. By attempting to dispute the findings of the Consumer Focus report in which it is claimed that 46 per cent of consumers are not aware whether their advisers receive trail commission, McMillan is on shaky ground.

The reality is that most of us know deep down that consumers do not know how much of their investments are paid out in trail. I still remember being amazed at discovering my IFA was getting a few pence a month from an old endowment policy I had taken out many years before. Of course, I had signed a plethora of forms to various providers to the effect that trail could be paid to the IFA firm in question and my adviser was very diligent, but a Scottish Amicable policy taken out in 1983? Blimey.

What really struck me about the entire three-way debate, however, was not just the quality of the points made and the replies to them. It was the underlying fact that, as McMillan pointed out, again and again a series of attacks are made on the industry on the flimsiest of grounds.

Money Marketing has been exceptional in unearthing some of the counter-arguments to some of the so-called “research” from Consumer Focus – the freedom of information email exchange between Consumer Focus and the FSA was a fantastic journalistic exercise.

But the question remains – why is it so many journalists are ready to print poor-quality research from organisations such as Consumer Focus? Some of it is to do with time, you are being asked to contribute copy on a story and it is the easiest thing in the world to just work with what you have rather than do some in-depth digging.

Another part of it is to do with mindset. If you are in a newsroom, you know that every other paper is likely to go with the easy story, the one in which the industry is slammed in an official report. Your news editor is expecting more or less the same from you, so why go off at a tangent and come up with something with a variety of nuances that are far harder to explain?

Let’s not forget either that all newspapers cater to their readers’ deeply-held prejudices – and if the prejudice is one where the adviser is a foot-in-the-door salesman, why would you want to go against the grain?

But that also begs a question, which I fear neither Neil Liversidge nor McMillan, in their excellent columns, quite get to grips with – prejudices never come out of nowhere.

It may be a twisted reality but at least some of it holds true or is deemed to be true in the mind of the person who believes it.

Preconceptions against bankers, insurers, advisers and the industry as a whole reflect real-life experiences of many millions of people.

IFAs as an organised group should be at the forefront of demands for change in that relationship. Unless they are, debates like this will always remain the exception, barely affecting far wider – if not entirely accurate – discussions in the national media, where IFAs are seen as commission-grabbing con merchants.

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

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There are 26 comments at the moment, we would love to hear your opinion too.

  1. Preconceptions against bankers, insurers, advisers and the industry as a whole reflect real-life experiences of many millions of people.
    Why did you omit phone hacking journalists, who will print anything true or false, for cash, Nic?

  2. The fundamental conflict in all this is that Joe Public is wary of being sold a product as the solution to a perceived need (even though a packaged product may often be entirely appropriate) yet, for the most part, is unwilling to pay a fee for pure advice entirely unconnected with the sale of a product. As Neil has pointed out, no thought is given to the amount of advice and small services that are commonly available on an ongoing basis without having to pay explicitly for those things.

    Just the other day, for example, a couple of my clients asked for my advice on a solar panels package they’re considering buying into. There’s some sort of yearly rebate involved which means that after a few years they’ll have recouped most if not all of their initial outlay plus they can sell back excess electricity to the National Grid. Why they thought that I’d be knowledgeable about such a scheme I really don’t know but I cast a eye over the paperwork and said that as far as I can tell the scheme looks sound BUT, of course, I also pointed out that I have neither the expert knowledge or authorisation to offer any sort of recommendation or endorsement on such a proposition. So that was 20 minutes of my time given FOC, just because they’re existing clients. What would have been the response from a purely fee-based IFA to such a request? Sorry, can’t help or £50 added to the next invoice?

    The FSA’s RDR, flawed though may be, attempts (I think) to address the issue of clients not wanting to be sold a product as the solution to every need whilst at the same time not wanting to pay fees for pure advice.

    Generally speaking, there seems to me to be nothing wrong with trail commission provided the client knows about it, knows what they can expect in return (periodic reviews, I guess) and actually gets it. But that isn’t the whole story because, as we know, there’s a lot more to having business on one’s books long term than providing periodic reviews. Reviews are just the most visible part of the equation.

    When all else is said and done, the proof of the pudding is in its eating. If you’re clients are happy with what they’re getting from you then they stay with you and hopefully recommend your services to others. If they’re not, then they’re vulnerable to being poached by a competitor. Those are the simple laws of business.

  3. I think the main reason IFA prejudice is mainly created by the media recreating old stories, which appear to be new. By the time the newpapers, television radio, the FSA and anyone else putting their two pennorth in I lose the will to live. Examples. Some people were sold endowments wrongly and suddenly everyone was sold wrongly. Some people were sold MPPI wrongly and suddenly everyone was sold MPPI wrongly. I am not saying that every IFA is perfect, but not every IFA can be wrong otherwise we would not have any clients.

  4. Just a technicality but…… the fee/commission that your adviser is receiving with regard to the endowment from 1983 (is this still in force???) is likely to be life policy renewal and not, in fact trail, meaning that it is likely to be 2.5% of the premium being paid and is NOT an explicit charge to the contract.

  5. Well done Nic you have just confirmed my pre-conceived ideas about journalists were not conceived but in fact were very true! Need i say more!

  6. “IFAs as an organised group”

    ROFLMAO

    “IFAs are seen as commission-grabbing con merchants.”

    Thanks to journalist who sell ‘sexy’ stories to the media?

    Yes, prejudice, appropriate word. The media should be regulated and have to pay up when a reader acts upon the statements made by glory hunting scribes and loses money.

    How many people have run away from their pension or other investments simply because one writer mentioned ‘trail’?

  7. Hmmm…. If only IFAs had a union or association…..

    If I started one, I would call it the ‘Association of Independent Financial Advisers’…

  8. I think it is highly unfair that the financial industry, in particular bankers and advisers, some how is behind all what has got wrong and should be blamed and demonised. The government and the regulators turned a blind eye to the risks the banks were taking, both here and abroad. In fact, it created such a boom that the Government felt it reflected well on them, although Mr Brown talked about he has policies had ‘got rid of’ boom and bust.

    I am not a particular fan of the banks/bankers but they should have been properly regulated.

    The FSA obviously enjoys not being the blamed party. Not enough blame anyway.

    Their existence did not prevent Northern Rock or any of the other banks from virtually going bust. All they have done is to increase the costs in the sector.

    FSA’s behavour has lead to that they have not met another one of their statutory aims:

    Their blame culture against the advisers and the subjective treatment of the banks, have lead to that the financial services in this country is mistrusted by consumers. FSA’s devisive treatment of advisers is helping the banks fleecing the consumers and making it more difficult for them to obtain independent advise.

    There are new rules coming in for increased capital adequacy, ringfencing retail banking and investment etc, and this will further increase the cost significantly. Where are the funds going to come from? From the consumers, of course. You cannot have two winners, banking industry making high profits to pay for all this, and consumers not being fleeced one way or another!

  9. Aha! So Mr Cicutti admits what we have all known for years. Many journalists won’t bother to go the extra mile to provide a well researched story and are also frightened to go against what they perceive as expected by the editor.
    IFAs have to go that extra mile for their clients, however, or risk a complaint (much more serious than the ones journalists get).

    Nic Cicutti also implies that the bad reputaion of iFAs must be justified because “prejudices never come out of nowhere”; or, in other words, there is no smoke without fire. Using that philosophy is what leads to people thinking that most muslims are terrorists, which is patently not true, or, as someone (I can’t remember who) a few years ago said all men are rapists. It seems that Nic Cicutti is happy to accept this sort of philosphy, presumably (because he brings it up) due to his own experience of amazement at losing a few pence off each premium to trail commission on his 1983 Scot Am policy. Blimey!
    Everybody knows that it takes a long time to build a good reputation and yet the merest hint of dodgyness, even if it is totally untrue, can destroy it. Likewise most people are likely to believe that any particular section of the populace is worthy of disdain if just one or two are proven to be so. That, however, does not make that attitude right but, as I believe Nic Cicutti suggests, lazyness and fear of journalists helps to perpetuate these myths far more than any individual can.
    I guess he is no exception.

  10. The problem with our industry is that the good we do is never talked about. Interestingly when carrying out a pension review for a client recently he also asked me to look over a quotation for solar panels as he did not understand the way the feed in tariff works. (Must be the latest door to door sale!).

    We do an enormous amount of good but it is never shouted about. We are the people who put a cheque in the widows hands at the time of deep emotional and often financial stress (one client in the last six months).

    We are the people that make sure that someone has an income when they fall ill. (Two clients at the current time).

    We are the people that say to someone on retirement all that arm twisting we did at least you have some pension in addition to what the state may give you (three clients at the current time).

    We are the people that are giving our clients options for income at a time when many are struggling with inflation in retirement.

    We are the people that complete a FOS claim form for someone who has blatantly been given bad advice by someone else in our industry, yet we don’t charge as it is for the good of our industry.

    We are the people who do a million and one other things for our clients but never get paid or never charge as they are all goodwill gestures and considered part of our function in the relationship we build with them.

    We are often what is termed a centre of influence and knowledge. ‘We know a man that can’.

    Rest assured under RDR that will all go. clients will come into the office, it will be straight down to business, never mind their other problems/issues that need addressing, the clock will start ticking the day they walk in the door.

    I don’t think that the FSA or you as a journalist will be happy until you see the lights switched out on our industry.

    However, that will be a glorious day as the FSA will be left with no one to regulate and you will be left with no one to write about so bring it on as I will be long retired.
    I believe I work like many other advisors out there, you get a good case to work on and you get one no so good, but you need to do the work as the client has every right to good independent advice. Yes some clients cross subsidize others, but that is the same in many industries and as long as the client knows what they are paying is it wrong.

    As a journalise in the financial services industry, you will not be happy until you see us all out of business and the public left with nowhere to go.

  11. I think you should choose your language more carefully Nic, “prejudices never come out of nowwhere.” The inference is that IFA’s must have behaved in such a way as to merit such prejudice. Racism, homophobia etc. – a poor premise Nic. May I respectfully suggest you clarify what you meant exactly.

  12. “….But the question remains – why is it so many journalists are ready to print poor-quality research from organisations such as Consumer Focus? Some of it is to do with time, you are being asked to contribute copy on a story and it is the easiest thing in the world to just work with what you have rather than do some in-depth digging.

    Another part of it is to do with mindset. If you are in a newsroom, you know that every other paper is likely to go with the easy story, the one in which the industry is slammed in an official report. Your news editor is expecting more or less the same from you, so why go off at a tangent and come up with something with a variety of nuances that are far harder to explain?….”

    Well, well Nic, as I suspected all along – your true colours indeed! All of your previous views and comments regarding RDR, trail, etc. etc. have just been exposed for the sensationalistic trash it truely is, spewed out by journalists of your own ilk. It’s not too hard to imagine your article on IFAs who went about their business with your work ethic.

  13. Nic, you finish by saying “IFAs are seen as commission-grabbing con merchants”.
    I presume that’s how you saw your IFA so I presume you dumped him as soon as you had concluded your business with him?

  14. I left the industry 2 years ago under the swathe of regulations and general feeling of despondency when tarred with the same brush of all previous miscreants and the so-called professional financial organisaitons feared by the FSA and the ongoing costs or remaining an IFA. Nic has done well in jumping on a bandwagon of distrust by the consumer and hasn’t really done them any real favours.

  15. Nic, what disgusts me about you as a journalist is that sometimes you prove you understand what you are writing about when your audience is IFAs yet when you are writing for the wider public you instead pander to their most ignorant prejudices and on occasion write totally misleading tosh.
    Because, unlike IFAs, you are not held liable for the costs of your recklessness, you are not prevented from defrauding the public by repeating your misinformation again in the future.
    I lost count of the number of times you repeated in print the story of your brief experience as a trainee get-rich-quick insurance salesman standing on your desk and failing to realise that such bad practices were exceptional even at that time and turned the stomach of any ethical person, let alone the regulator of the day.
    I support a free press but just because you are able to spout codswallop doesn’t mean you are not allowed to write intelligently.
    Show us the best of you all the time and no one will have anything to complain about.

  16. Personally I think the tide has turned. When I used to tell people what I did, I used to get the dodgy IFA story, whereas now I get the dodgy bank salesman story. People even tell me how good their IFA is!

    I suppose the issue is that people’s opinions based on an historic bad experience takes a long time to recede from their memory. Hopefully the new dawn of the industry will further promote the image of the IFA in the public eye as a seasoned professional.

  17. Was no one else a little perturbed that the response of an Aifa Director / Council member (whatever) to a comment made to one of the most well known financial journalists in the country can be summarised, more or less, as ‘step outside and say that’??? Not the desired tone really is it – ‘Have you got the balls’ etc? Dear me.

    Paul Lewis has said ‘see an IFA’ more times than I care to remember – not sure he’ll be so quick in the future. If the lapses of professionalism Paul went on to highlight in his wonderfully cogent Open Response (that’s the danger when you send an Open Letter) hadn’t happened, he wouldn’t have been able to report them would he? And just look at some of the experiences referred to in response by consumer bloggers – IT Contractor in particular – not good is it? Also, doesn’t this put Aifa’s top man Stephen Gay in a rather embarrassing position when speaking to Paul or the BBC in the future, as his onerous role requires? Surely a lobbying organisation needs to maintain open and professional dialogue with journalists – put them right when a mistake’s been made of course – but pick fights with them in a cyberspace playground over an issue Aifa’s policy or PR people could have dealt with as part of the day job? Not really why we pay our subs is it.

    Saw the film ‘How to Lose Friends and Alienate People’ recently – can’t imagine why this little episode reminded me of the title.

  18. “But the question remains – why is it so many journalists are ready to print poor-quality research from organisations such as Consumer Focus? Some of it is to do with time, you are being asked to contribute copy on a story and it is the easiest thing in the world to just work with what you have rather than do some in-depth digging.

    Another part of it is to do with mindset. If you are in a newsroom, you know that every other paper is likely to go with the easy story, the one in which the industry is slammed in an official report. Your news editor is expecting more or less the same from you, so why go off at a tangent and come up with something with a variety of nuances that are far harder to explain?

    Let’s not forget either that all newspapers cater to their readers’ deeply-held prejudices – and if the prejudice is one where the adviser is a foot-in-the-door salesman, why would you want to go against the grain?”

    So basically what you are saying is ‘Do as we say, not as we do’?

  19. I wrote a long response yesterday to this but for some technical reason it did not get printed so here is a summary
    .
    1. Trail commission…..if you want to attack this then investigate the end of year rebates that all the big supermarket chains receive from their suppliers. These cash rebates are demanded by the big supermarkets but where does the consumer see the benefit of these…yes I can hear the defence from the supermarkets already…free this free that…
    2. When you signed up for the endowment if the IFA had told you about the pennies trail what would you have done about it and how much difference would it have made to your decision to buy and/or your premium….
    3. On the same basis if you’d bought say a car on finance/hp/lease and found rebates etc then try taking the car back and demanding a rebate etc…
    4. Everybody chooses to forget/ignore that IFAs are commercial organisations and are required to generate income and profit.

  20. As usual, Nic makes some good points and we as IFAs go totally over the top in our replies, although there have been some very good poitns made as well. What I have always found perplexing is that whilst the industry is held in such contempt (allegedly) by Joe Public, when you speak to the public who actually deal with an IFA, the reaction is usually totally different, along the lines of ‘Of course they are all crooks, but not my IFA, who gives me good advice etc’.

    I guess its much the same as for the French – of course we all hate the French – remember Agincourt (which let’s face it wasn’t really that long ago!) – but when you meet an individual Frenchman or woman, invaribly they are nice civil people, the same as we are really.

    Its just easier to say we hate the French and for the Public to say all advisers are crooks, but it doesn’t really mean anything at all. Much as someone above has said, no one likes journalists, politicians, regulators, double glazing salesmen – but most of them, like us, are really likeable on an individual basis.

  21. Tony Cohen says it all.

    How can Nic get away with this statement?

    ” prejudices never come out of nowhere.”

    Think about it. I want Money Marketing to think about it too. As Tony says, this immediately excuses and justifies every racist, homophobe and bigot. “There’s no smoke without fire!” they say.

    I have news for you Nic: Prejudices do come out of nowhere and you should be absolutely ashamed and admonished for making this asinine, crass, ill informed, bigoted, statement.

  22. Tony and Chris F – Nic qualifies the statement you have taken exception to by stating

    ‘It may be a twisted reality but at least some of it holds true or is deemed to be true in the mind of the person who believes it.

    Preconceptions against bankers, insurers, advisers and the industry as a whole reflect real-life experiences of many millions of people’.

    Just look at the real-life cases Paul Lewis set out in his letter – we should be more concerned to see standards raised and poor practice wiped out then dismiss critics as ‘prejudiced’. That really is the road to oblivion.

    Sorry guys but on this occasion, and as Gordon Brown used to say, ‘I agree with Nic’.

  23. Asinine, crass, ill-informed and bigoted? Wow, that’s a heavy charge sheet.

    Prejudices don’t need to be true or universally applicable to be held, they just have to be perceived to be true, or for there to be enough truth in them to make sense even if they are then twisted out of recognition. The BNP might be lying if they claim that immigrants are taking white people’s council housing or jobs, but if people believe them, it becomes “truth”. In the case of bad financial advice, I think we can all agree there’s been enough of that over the years for many people to take it as a subjective “truth”. Isn’t there?

    Colin Tranter gets my point, shame you don’t. Except, Colin, that Gordon Brown never said “I agree with Nic”, or at least, not to my face. 😉 Cheers…

  24. Nic Is correct
    Hitler managed to get people to believe a whole nation was evil and therefore needed to be liquidated.
    People like Nic, egged on by the FSA and Which magazine, may just suceed in doing the same to IFAs’

  25. In the past 12 hours I have received seven emails from people alerting me to the comment above and telling me that however much they don’t agree with my views, they are sickened by it.

    One emailer has written to the moderators on this site asking for it to be deleted. Personally, I’m happy for it not to be, if only because the comment (anonymous, of course) says more about the person making it and the industry s/he is part of than it does about me. For which I’m grateful.

  26. The proof of the pudding is in the eating. As a profession or industry, call it what you like, IFA’s, the better ones anyway, which I suggest is an ever-increasing proportion of us, do more in the way of sorting out other peoples’ messes or oversights or the gradually accumulated consequences of long term neglect than just about any other profession I can think of. In those respects, the services we provide must surely be very nearly unique, which is why our clients stay with us year after year after year.

    Yes, there are legacy issues from the past and, even in the IFA sector, there are still too many incidences of downright slovenliness or commission-biased product selling.

    But let’s be positive about this, because things are definitely and measurably improving, year on year. Complaints about IFA advice are still higher than we’d like but, as a proportion of the total, they represent (I read somewhere else just today) just 1.32% ~ a mere 1/76th, which may not be perfection but it’s pretty good, I think we can all agree. If we keep going like this, it may not be too long before we can boast of the proportion being just 1/100th.

    For all its imperfections (and there are many, not least its exorbitant cost and lack of accountability), regulation is actually improving industry standards, albeit in ways that are often perceived to be both painful and unjust. As IFA’s, we’re at the forefront of the ways in which the industry is improving. So take heart. If we can weather the shitstorm of the RDR and still make a profit, we may just emerge as the jewel in the crown of the UK’s FS industry.

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