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Pearls of wisdom

The world is our oyster in the land of dotcoms and we particularly enjoy putting forward irritating grain-of-sand-type issues with the idea that our users will turn them into pearls of debate.

A recent wrangle was sparked by a piece entitled, Are financial advisers worth sweet FA? It stemmed from the experiences of punter Mark Storey and a particular encounter with an adviser called Les.

Mark says: “I was solvent, I had no loans, no debts. I had a pension – admittedly somewhat under-performing – life insurance, personal accident insurance, health insurance and I was making regular savings. How could Les have painted the future so black?

“The first thing I said to him was that I did not want a long-term investment plan as I was not sure of my future career path or country of location. I might even need the money to start a business. Now here I was about to put my name to a 30-year plan. What had Les put in my tea?”

Mark bravely told Les that he did not think the plan was right for him. Les&#39 response? “Basically, if you don&#39t trust me we had better say goodbye.”

Mark&#39s conclusion was that after experiences like this one, he would rather look to the internet and trust his own judgement.

All in all it was not an edifying experience. But surely this is rare? We decided to put it to the test and ask our users to vote on the matter. The results were amazing. Seventy-two per cent of the 400 or so who voted felt they were better off without a financial adviser of any kind.

Jamie Scott is an IFA of 18 years&#39 standing. He was not surprised by the poll result but says this is down to the fact that people using investment websites are what he describes as self-taught, generally successful individuals who feel they can do everything a good IFA can do.

It is true that more than 80 per cent of the users are in the ABC1 marketing bracket, making them the most interested and active. But the most popular occupation is “student”, closely followed bypeople in IT and retail business. Finance and banking makes up just 6 per cent.

Scott rightly has some words of caution for those who class themselves as sophisticated investors: “Have they got time? Do they know all the ways to save tax or how to obtain that advice or, more probably, are they reacting to historically expensive products brought to their attention by the media? And exactly how qualified are the journalists? I keep an open mind. Some journalistic commentary is excellent, some isbest reported in Viz. We are stillneeded, are better informed now than ever before and I still have pride and enjoy the job that I do.”

These words ring true for investor Matt Littleson who told us: “Approaching retirement last year and never having thought that I could learn from a financial adviser, I was a bit cynical about agreeing to meet one to review my finances. One year on, I am glad I did as I did not know as much as I thought.”

Speaking at the Association of Independent Financial Advisers&#39 launch conference last September, the FSA chairman Howard Davies said: “IFAs should, and in my view will, play a vital role in the retail financial markets of the future.”

He pointed out the rising strength of the sector, including the unprecedented growth in registered individuals in the IFA sector and comparatively better persistency. PIA figures continue to show persistency on regular-premium policies sold by IFAs to be higher than for company representatives – after four years, the persistency rate is 77 per cent for IFAs and 68 per cent for company reps.

Another positive fact is that consumers&#39 complaints to the PIA Ombudsman break down roughly as 85 per cent about product providers compared with just 15 per cent for IFAs. Interestingly, the numbers of phase one of pension review cases came out in justthat ratio as well.

At the Aifa conference, Davies added: “The additional public focus on standards of selling and the regulatory pressure for higher training and competence requirements was always likely to work to your advantage. Of course, standards of advice and customer service still have plenty of room for improvement.”

IFA Promotion acting chief executive David Elms says: “Off-line, the need for advice is growing and growing. Despite the best efforts of the Government to introduce simplified financial products, our experience suggests that consumer confusion is running at an all time high and to a certain extent this still applies to online activity as well. IFAs do not just advise and inform, they also take the legwork out of the advice process.”

It is not surprising that one-third of investors will rely on everything that their adviser tells them and will not make any checks. Nice to know there are so many trusting souls out there.

I had my first-ever encounter with an IFA as a customer last week.

In every way but one I believe it was typical of adviser/customer meetings. He was warm and friendly and even laughed at my jokes. The next 10 minutes were very interesting.

He told me what a waste of time disclosure was, that the industry was hugely over-regulated and that he would have to bore me with lots of regulator-required information that would not necessarily enhance my financial understanding.

Then he sat back and said but let&#39s talk about you – what did you do before you worked for Interactive Investor? You can imagine his horror at discovering that I was only six weeks out of a career with the FSA.

Poor chap. He recovered well tho-ugh and laughed at my jokes even more after that. He even told me that shopping instead of saving was not such a terrible thing. I think we can do business together.


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