The frost glistens, the Earth is hushed and the Magi turn to the East toward the bright light on top of Canary Wharf for any sign of the birth of a new system of financial distribution.
David Severn, the John the Baptist of Polarisation, smiles benignly and predicts at a rethought second coming for CP121 around Christmas while the IFA archangel Paul Smee swaps literary jokes with the IFAs' potential King Herod Sir Howard Davies while handing him a menu.
The menu concerned is not the list of vittles provided to those worthy enough to attend the Aifa's annual dinner but Paul's brainchild for ensuring the more lunatic elements of the original CP121 proposals are removed and proposes a system that more accurately reflects they way that IFAs and their clients might wish to transact business in the real world.
The report created by the Aifa/IFA Promotion working group is well researched, elegantly argued and possesses a clarity of thought and purpose which CP121 lacked.
It suggests quite correctly that the consumers are deluged with unread and untim-ely information. Its solution is to confront the payment problem early in the relationship – almost indecently early. This is a commercial relationship, this is how it is going to work and this is how it is going to be funded – bang.
The effect of this idea on the IFA market will certainly be profound and, in my view, almost wholly beneficial. If these proposals are accepted, those who have sought to brand the IFA community biased and commission-hungry will have to come up with a new line of attack. There will be total transparency with market comparators to guide the client in comparing value and it is that final part that is so clever.
According to Aifa, it is not just IFAs who will have to declare how their advice is funded but all distribution channels. The paper challenges the regulator to police not only status disclosure but also the way that all channels are remunerated and come up with an industrywide and equitable disclosure model.
How can you create a disclosure that accurately compares banks selling products as an occasional sideline with little ongoing service with IFAs who are selling full-time and ongoing advice? I do not know but it will have to be done and, unless cheating is accepted, the IFA proposition can only be strengthened in the process.
Those who had hoped that CP121 would not only introduce multi-ties but also deal a death blow to the IFA community are going to be sorely disappointed. They will not be able to achieve their Nirvana of pretending to be independent while being tied. It is also a massive reality check for the FSA and the Treasury, with both having to move from nebulous concepts to hard facts and the FSA from social engineer to market policeman.
In practical terms, Aifa's menu will force IFAs to be more transparent more quickly but that will only enhance their proposition. “You know where you are with an IFA” might be IFAP's next campaign. Certainly, the menu concept will force most IFAs to professionalise their marketing but that is much needed anyway.
Where does this leave multi-ties and the rush to grab distribution that CP121 generated? If accepted, I see little pressure for IFAs to become multi-tied. Some might split their businesses but mass migration seems unlikely. Either way, the IFA sector's real problems have not changed. They include no PI insurance, chronic under-capitalisation, disjointed IT, putrid provider service, inadequate marketing and poor productivity. Providers still need to invest – both in themselves and their IFA distribution.
In the meantime, heartfelt congratulations are due. As the only other person in this industry who knows how difficult your position is – well done on a brilliant job, Paul, and Happy Christmas, old friend.
Garry Heath is chairman of Impartial