In my last column I expressed my surprise at the recent Towry Law deal
done with the ICS. From the point of timing, it could not be worse as
levies will be collected in July and August (yes, there are two this time).
Is this the chance we have been waiting for? Polarisation will go,and we
need to ensure that what follows gives professional advisers a chance to
Am I alone or is there a feeling of déjà vu about some of the
recent acquisitions? The parallels with the rush for estate agents is
Buying market share organic growth is always a point of debate as a large
number of firms all commit to growth in the number of registered
individuals which could never be achieved without the use of cloning.
For some commentators to suggest that this shows confidence in the IFA
sector I would contend that they are wide of the mark. The introduction of
multi-ties will allow for a more profitable operation in the short term
and, as we all know, the pursuit of long-term profitability is not a
character trait of the bigger financial services provider.
To put another way, the shareholder is always more important than the
client. The introduction of multi-ties will give true independents the
opportunity to prove their worth, as clients begin to pose the question
“exactly who are you working for” and this becomes the ultimate test of
independence – are you working for the client or your firm?
Whatever the bigger operations operating multi-ties may say, their
advisers work for them and not for the client.
Recent surveys have suggested that the public place a low value on the
provision of advice. Is this not because they fail to recognise the amount
of work the IFA does to produce a single recommendation? If we are to
change this mindset, then we must ensure our advice costs are fully
transparent. To ensure this is not frustrated by product design, we must
lobby for the introduction of truly clean contracts.
Under a clean contract, the commission or fee is separate to the contract
itself, if a distributor, an IFA or a multi-tie wants to take more
commission or fees, then the cost increases. This would avoid the current
situation where higher commission is offered based on the inherently flawed
concept of volume being equivalent to profit.
I only hope that in the review of polarisation and the parallel review of
retail investments that the powers that be recognise the dynamics at work
and the correct model if consumer choice at a reasonable price is to be
Ron Sandler recently declared that he would be speaking to IFAs while
conducting his review. This is welcome but I only hope he selects them with
care, given the favour that some have expressed for multi-tied
distribution, either publicly or priv- ately. This may mean that the days
of the commission-only IFA are at threat but perhaps we will all appreciate
the demise of less profitable clients in favour of a business which has
true value when it comes to selling it. This can only come through
transparency and an increase in professionalism.
To return to the issue of the ICS, some IFAs have suggested that they will
be withholding their ICS payments. Shouldn't we all, at least until the ICS
explain just how this deal is in the best interests of the sector and not
just the shareholders of a particular adviser in isolation.
What about Ilog? Will it withhold their payments too? If it truly want to
supports IFAs this is its chance to nail its colours to the mast.
Robert Reid is principal of Syndaxi