Earlier this week, I found myself playing golf at the prestigious Royal
Blackheath Golf Club when a sudden downpour sent me scurrying towards my
golf bag in search of my waterproofs.
Forgetting that the last time I wore these was in 1990, I quickly put them
on, only to convince my playing partner that at some time I must have worn
them while appearing as a lounge singer in Las Vegas.
Which only goes to prove that nothing stays the same and that to believe
otherwise is being dishonest, even if you are only trying to convince
yourself and not others.
Reading the various comments on market consolidation which followed the
purchase of Willis National and Towry Law, it is clear that the real threat
to independence from the rules post-pol-arisation may come from a different
quarter as providers look to multi-ties as the means to an end.
Control of distribution is seen as crucial to the very existence of the
packaged product providers.
We must cease being reactive and become proactive in our defence of the
IFA concept. If we do not, we may find ourselves with a market governed by
a set of rules tilting towards multi-ties and away from the
consumer-orientated benefits of independence.
There is no doubt that multi-ties do offer many logistical benefits when
controlling big salesforces. This does lead me to consider just how many
providers will be in a position to manufacture and distribute as opposed to
those companies which will simply distribute products designed, built and
administered by a third party or parties.
Under multi-ties there has to be a lead provider. If we assume that this
provider does not have to be a manufacturer (Barclays is a good example)
then we could find the market consisting of three or four third-party
administrators with design and marketing similarly outsourced.
This is dramatically different to the current model and the infrastructure
of the providers which currently exists would have to be drastically
reduced. It would also make it far easier for the foreign provider to enter
the UK market as a virtual life office.
I believe that, providing the IFA offers added value, he or she has little
to fear. For those who believe product selection is all, they will either
be forced towards multi-ties or find themselves having to sell their
business in what by then may be a buyer's market.
IFAs of the future must ask themselves what role packaged products will
have in their portfolio. Or should they be thinking more about wrappers
where the costs are far more transparent?
The news last week that the cheapest funds performed worse than their
expensive cousins was no surprise to me or, indeed, to most experienced
IFAs. It shows the danger of relying on charges as any sort of benchmark.
We all want to avoid recommending expensive products but this could prove
to be a false economy which the client and we will come to regret.
The likelihood is that Catmarks will soon apply across the board. This may
imply that DIY investment is safe when the risk of unsuitability remains
What will the FSA say to the investor who buys a stakeholder pension on an
execution-only basis on the strength of its tables and the Catmark which
only serves to reduce his benefit entitlement or where, after a few
contributions, the plan stops and he then faces a minuscule annuity when he
Just as was the case with my waterproofs, some things can look fine but
when put to the test they are unsuitable for the purpose for which they
Robert Reid is principal of Syndaxi Financial Planning