I try to be circumspect in my comments on the utterances of other IFAs. However, Tom McPhail’s prediction last week that savers will accumulate 10,000 by way of an Isa with a view to rolling it over into a personal account come 2012, thereby “hugely destabilising the IFA industry” is, to my mind, nothing more than alarmist rubbish. It is just another bit of free publicity for Hargreaves Lansdown.
First, 99 per cent of the population have only the vaguest awareness of the Government’s plans for personal accounts, let alone how they are likely to work in practice. Advice will be required. Second, based on this Government’s track record on pretty well everything to do with pensions, most people are likely to be extremely distrustful of any new Government initiative. Advice will be required.
Third, no one yet knows who is to administer the scheme or what investment options will be available or what the charges are to be. Advice will be required. And fourth, the strategy Mr McPhail outlines is exactly the sort of thing that only an IFA would think of to begin with.
Even if people do accumulate money in an Isa in preference to funding a personal pension plan, most will be very reluctant then to lock it away in a pension plan unless some meaningful progress has been made on the core issues of the annuity trap and lack of inheritability of unspent funds after retirement.
Apart from anything else, the priority of most people below the age of 50 is to pay debt and to feed and clothe their families.
My attitude is to wait and see what happens, not least because 2012 is a whole five years in the future and, with luck, by then we will hopefully have a Conservative Chancellor of less Machiavellian mien.
After the white elephant of stakeholder, the IFA sector has much more pressing issues on its plate, not least the all-pervading virus of over-regulation. It might just help if the FSA’s reaction to every call to do better could be something other than just producing more and more spurious new initiatives that make compliance even more vague and onerous than it already is.
For example, if the FSA so wished, treating customers fairly could be encapsulated into a fundamental three-stage process:
l Presentation of relevant regulatory documents at the first client meeting.
l A thorough fact-find and
l A thorough letter of recommendation with a clearly defined set of contents such as present circumstances and objectives, budget, attitude to investment risk, some commentary on the client’s existing provisions, recommended products, a brief discussion of possible alternatives, risk warnings, tax considerations, points for future consideration and so on. Hardly rocket science.
Why, oh why, does the FSA have to make everything so difficult and complicated? As far as designing a workable and effective business model for IFAs is concerned, I think it hardly fanciful to suggest that a vastly less expensive organisation than the FSA could make a vastly better job of it to the benefit of all concerned. Waving two fingers at Brussels would be a very good start.
WDS IFAs, Bristol