Buried deep in a recent document issued by the Treasury was a suggestion that Catmarks could extend to advice. After all, wasn't advice just another product?
I suppose we should not be too surprised at that view, given that too many IFAs offer a service where the purchase of the product predominates. Before you all rush to defend the smaller IFA, I should add that I consider the bigger IFA firms some of the worst offenders. Their formulaic approach to lump-sum investment does nothing to convince the sceptics that advice is not just another product.
They further compound matters by referring to the availability of “free advice”. In my opinion, items that are free are generally worthless. Perhaps the phrase “free advice” should be banned if we are to persuade individuals of its undoubted value.
If we want to be seen as professionals, we need as a matter of urgency to separate the three steps which are curr-ently linked and their individual value diminished. These are information, advice and execution.
The concept of Catmarking advice shows that the comments made about quality versus suitability have fallen on deaf ears. The paper refers to a form of focused advice, where the danger will be that it is the client who determines the priorities, which is ironic given the fact that many clients would say this is the role of the professional adviser.
Will the Treasury allow us to give Catmarked advice without any hindsight risk that the lack of suitability becomes our fault as time goes by?
If the answer is yes, how long will it be before this form of advice is available in an interactive form? This has massive implications for advisers, especially as the “C” in Cat stands for charges. Will the Treasury set the rate for this type of advice irrespective of the adviser's standard hourly rate?
To respond effectively to this paper, we must enlist the consumer bodies which value good-quality advice but we must play our part and ensure that the quality of our advice is clear for all to see.
The issue of the Isa guides simply provides the Treasury with more material to demonstrate that the term “IFA” does not ensure a lack of bias or that the most suitable product will always be selected.
So, how can we prevent this dilution of the added value service we need to promote to the public at large? Well, we can all help by separating advice from execution by issuing engagement letters to all clients which detail the services we will provide, with each step or task clearly defined and costed. This, you may say, pushes us towards fee-based advice and what is wrong with that?
Perhaps the answer is that IFAs will be the source of non-Catmarked plans, with the multi-tied agents restricted to selling Catmarked plans only.
Professional IFAs can survive but this depends on the separation of advice and execution. Let us start the debate now as to how this can be achieved and factored into the debate over polarisation. We must have a clear point of distinction between independent and multi-tied but a complicated message will be lost so perhaps the promotion of the slogan “advice before product” is the way to achieve this in the short term.
Let's start today.
Robert Reid is a director of Syndaxi Financial Planning