View more on these topics

Now is the perfect time for advisers to stop selling products and to start selling their advice

By limiting the charge on stakeholder to 1 per cent, the Government has very neatly taken a giant leap towards removing front-end charges for all products. I regularly hear of companies offering 1 per cent-style pension

plans but with commission terms of 30 to 80 per cent

of Lautro rates. This means one of two things. Either

companies are confident of buying market share or they are convinced that all these plans will run the majority

of their full term.

Rather than consider these strategies from within,

let us consider how clients will react once they are aware of what is going on. One of my clients recently had a visit from their accountant who was accompanied by an IFA consultant from a provider which I will refer to as Scottish Miscellaneous. The consultant explained the stakeholder concept and, in particular, the 1 per cent cap on charges. The accountant was asked what he would earn from the setting up of the scheme and informed the client that he was not taking up-front commission but

4 per cent level commission. At this point, my client said: “I am confused. Isn&#39t it the other way round with

commission at 1 per cent and the charges at 4 per cent?” No, they chorused. This was all too much for my client, who suggested that the meeting had reached its natural conclusion. As he helped them to leave, he explained that, as a businessman, he never dealt with companies which took such a cavalier approach.

I fully support his comments and, with every provider telling me they need 15 per cent of the market to break even and between 20 and 25 per cent to make a profit, that appears to leave space for just four to six providers in the long term. So what of the providers which pull out of the market later? Will we see a re-run of the situation of Crown Life, where marketing triumphed over servicing and led to the demise of that provider? I suspect we will and that will leave the IFA to pick up the pieces yet again.

There has never been a better opportunity for the professional adviser to stop selling products and start selling advice. The introduction of fund supermarkets is not the end, it is the beginning of a new market where IFAs will give advice but leave the unprofitable element of product purchase to the client and a third party, for example, a fund supermarket. From a regulatory standpoint, this would be unwelcome as the regulator is product-led. But this should not be our concern. Regulation is, after all, for the benefit of the public, not the regulator itself.

We need to consider this now and take the first step to promoting the value of professional advice by banning the use of the highly misleading term “free advice”.

There is no such thing – someone has to pay.

Just as with stakeholder, it is the shareholders of many of these product providers who will ultimately

pay for the current approach of buying business,

only to see the target market share unfulfilled and/or

the schemes move to a provider offering lower level of charges. By selling on price, you are dealing in a commodity. We should never make the same mistake with

the sale of professional advice.

Start today by asking yourself what we do for the client that they cannot do for themselves. In the information age, people will be better informed or, in many cases, confused at a higher level. Whichever state they are in, it is our client who will be our main competitor

in the future and we must recognise this and build our businesses accordingly.


Irish Parliament: more room for charges

The Republic of Ireland has unveiled its planned stakeholder-style pension, the Personal Retirement Savings Account, but without the tough charging regime.The new pension shares all the hallmarks of stakeholder, including an emphasis on portability and flexibility, but the products have charges capped at 5 per cent of contributions and 1 per cent of total assets.Scottish […]

Friends slated for block on windfalls

A Belfast IFA has lambasted Friends Provident for denying some rebate-only pension scheme members windfall payouts when it demutualises.Aon McMillen Consulting senior consultant Richard Oats says he was puzzled when colleagues and clients were sent paperwork to validate their claims to windfalls ahead of the demutualisation.Oats had joined a rebate-only pension scheme before Friends announced […]

Baggette Tyror rebrands as Bluestone Financial Services

IFA Baggette Tyror is re-naming itself BlueStone Financial Services as part of its expansion plans. The firm says having been in business for 15 years it has reached a key stage in its development and thought it appropriate it should move forward with what it feels is a more modern name. It is now looking […]

Heath says IFAs need a new name

The phrase “independent financial adviser” may need to be changed to increase clarity among consumers, according to former IFA Association director general Garry Heath.Heath, director of Portfolio Members Services, says polarisation underpins the status of IFAs and if polarisation is scrapped, it could be time to redefine the territory to send a clear message to […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm