On Friday, I received a phone call from the BBC’s Money Box inviting me onto the show to discuss IFA fees. Unfortunately, I was replaced by Neil Liversidge who did a good job of getting across the message that IFAs do fully disclose fees.
What I was concerned about was Paul Lewis’ single-minded viewpoint of just concentrating on charges rather than showing the whole picture to the consumer.
IFAs are like any small business in terms of running costs but have the additional burden of significant regulatory costs and capital adequacy levels to maintain.
Instead of apologising for our fee structures, I firmly believe we need to educate the consumer of these costs and to highlight the levels of protection they enjoy.
Is it fair to compare a full face-to-face advice service with an online execution-only model? The answer is obviously no.
Many working in the media seem to think almost everybody is able to go online and sort out financial matters when in reality many find financial planning confusing and baffling.
I would even go further and say that information found online can be dangerous and the chances of online fraud should not be underestimated. For instance, look at the increased number of Ucis and Ponzi schemes being closed down. Of course, there are many reputable investment platforms online as well but it does highlight some of the reasons why people should seek advice.
I have myself argued for many years that our industry needs RDR to force advisers into fuller disclosure of fees. Instead of apologising for our fee structures, we need to concentrate on the benefits to the consumer and educate the media on the significant costs faced by the profession.
I often enjoy Money Box and we should not see Paul as the enemy but instead try to educate him that we offer a different type of service to online solutions. I would also want to highlight to Paul the unfairness that IFAs feel in respect to not having a level playing field in the advice arena.
We have to compete with online firms and some journalists who operate websites for commercial gain without holding authorisation in the field that they write about. If RDR sought to break the link between products and advice surely advice is the thing that should be regulated in all of its forms.
Like many advisers, I feel that the present funding system of FSCS is unfair as it punishes those who remain in the industry who have worked with integrity and have not been involved in misselling.
I would like to see the introduction of a product levy and even a licensing system of products to take away some of the potential misselling liability as often most of this comes from poorly designed products.
I’m afraid it looks like a dim possibility and therefore we require the IFA community to sing with one voice in an attempt to educate both the general public and those in the media. Advice has never been free and we should stop apologising for the fact that we have to charge a fee.
Peter Herd is managing director of Essential IFA