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Outside edge

Reviews seem to be proliferating and although we should always try to take part, the sheer number means that to respond to all you would need to have nothing else to do.

Although I am bound to confidentiality concerning the discussions I and others had with Ron Sandler this week, I can report that I was both impressed by his attitude and left the meeting lifted by his approach.

Perhaps the biggest challenge for the professionallyminded IFA is not external but internal, given the entrenched attitudes of some IFAs. Is it not ironic that we as planners can only succeed if we understand the concept of change, yet so many of our number resist change like there is no tomorrow.

Many continue to have a problem in accepting that the FPC is just too low a level of testing for the professional adviser and the news that the LIA is to attempt to run a quality standard simply proves that too many in our sector have no idea how to build a profession.

It is the public who will ultimately award the badge of professionalism, not the trade bodies. After all, promising standards is one thing, delivering them is quite another.

Moving from quality to commercial reality, the 1 per cent world will require that the insurance companies determine the profitability of each of their relationships and the news that IFAs are soon to be ranked according to their profitability in terms of gold, silver or bronze by providers should come as no surprise.

The report went on to state that 80 per cent of all business placed by IFAs comes from only 25 per cent of RIs. What they did not say was whether the ratio then reverses when it comes to profitability. I suspect that in many cases it will, provided that the total costs of dealing is accurately recorded. This will need to include the cost of all support whether in cash or in kind. Perhaps this is just another reason to move to clean contracts where no cross-subsidies exist.

I have never accepted the volume equals profit argument. Far too many firms have met their end using that as barometer of success. For my own clients to subsidise other IFAs&#39 clients is unacceptable and simply pushes me away from traditional providers and towards Sipps, etc.

If the providers are not alert to this threat, they could soon find themselves getting plenty of volume but very little profit.

Talking of profit, the news that Scottish Amicable has bit the dust has little to do with strategy and I would suggest might be more to do with the cost of moving existing plans onto a 1 per cent charging structure.

There are other major players who are similarly challenged. Rationalisation may be fine in principal but in reality the cost of taking some of these firms over could be just too much to bear, given the baggage they carry with them.

In its supervision of prov-iders, the FSA needs to test business strategy as often as it measures financial strength. Companies which are unable to move to 1 per cent will find themselves under even greater pressure as time goes on. If another company was to find itself in difficulties, albeit on a lesser scale to Equitable, the responsibility will be current and not historic.

Whatever solutions Sandler proposes, we must greet these not with derision but with reasoned debate. We must view it all from the perspective of the consumer.

I close with the words of the inimitable Peter Cook: “Integrity is a value thing and I&#39m willing to pay for it!” (Source: The Piano Teacher – Pete & Dud). Perhaps the words “pay for it” are out of place but we certainly need to invest to ensure it.

Robert Reid is principal at Syndaxi Financial Planning


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