Regardless of what Ron Sandler concludes or recommends, the hysterical over-reaction to his consultation paper has highlighted many of the structural problems within our industry.
We have seen much self-interested ranting but little constructive debate. Why is there such fear of external intrusion and deliberation? Does it reflect an underlying unease that perhaps all is not well or is it just that everyone is too busy and cannot be bothered with any upheaval – even if such an upheaval were to deliver a more efficient and effective industry for consumers and practitioners?
I have a couple of questions. How many of those who have jumped to the defence of IFAs are not themselves IFAs? How many of these same individuals have cited client interest in their assessment of the paper? Er, almost none. It is only those IFAs who appreciate that their clients' interests should be 100 per cent in tune with their own that deserve to have a view.I hope those who believe there is no evidence of commission bias are more realistic with their clients' portfolios.
No one is saying that everyone is guilty. In fact, no one is yet saying that anyone is guilty of these practices. What is being suggested is there is sufficient anecdotal evidence to suggest it may be worth investigating the possibility of wrong-doings. Are IFAs so concerned that they are not content for an outside body to assess their industry? Is it that bad?
There has been much jumping up and down about the ability of IFAs to provide investment advice. I read with incredulity a suggestion by one IFA was that the problem might exist although it was not the fault of IFAs. So who did he feel was to blame? The people who organise courses, of course. What was not made clear was if he was referring to those people who run courses at no cost to IFAs or the broader group of commercial course providers.
It is clear to see from the annual Isa data that a significant number of IFAs rush into hot funds each season. We have seen it with Jupiter, Aberdeen and now New Star. This is not necessarily wrong. What would be more interesting would be to see how many IFAs take an ongoing interest in their clients' portfolios and switch away from these star funds, before performance dips. I wonder.
To my mind, another of the most interesting questions posed by the paper is regarding consumers' lack of investment product knowledge. Has this arisen due to a lack of interest, over-complex products, a weak media, a thick population or some combination of these or other factors? Does anyone care? Why has there been no comment on this subject?
Another interesting point is how quiet the product providers have been. Although the main focus seems to be on distribution, life offices and fund management groups should not be considered exempt from close scrutiny. After all, who is funding all of this alleged commission bias?
Why do life offices feel they must make such enormous commission rates available on with-profits bonds? Yes, I know many of you rebate it but this is not the point. Do life offices pay so much in an effort so they can manipulate IFAs to sell an inferior product? Are life offices so concerned about the strength of their distribution model that this is their last resort? Should these issues be ignored? I think not.
There are many well run, professional firms providing clients with an excellent service but anyone believing everything in the industry garden is rosy is misguided. Should we stumble from one crisis to another or reflect on where we we are and plot a path for the future?
Some prefer evolution to revolution but this has been the easy option too many times already. I feel this time we are heading for serious revolution. If it leaves your head spinning then maybe it is time to get off. Think of the bigger picture. The system is not working. What are you doing about it?
David Ferguson is a director of product design and marketing consultancy, the abacus and can be contacted by email at firstname.lastname@example.org