Does the panel think the establishment of primary advisers as a wholly separate entity should even be considered? Would it be preferable if primary advice could only be accessed when part of, and overseen by, an organisation that embeds professional (chartered or certified) financial planning for its most senior practitioners at the apex of its advisory tiers?
Gill Cardy: This is unrealistic. A code of ethics and conduct should be compulsory for all. Professionalism is a state of heart and mind at whatever you operate.
There are many clients who do not have complicated affairs and who do not need regular access to the most highly qualified advisers.
Many professional firms may want to maintain their brand in the high-net-worth arena and may not want to be seen to be operating in the primary advice sector.
Similarly, a primary advice firm may not want its overheads increased by having to employ the most highly qualified people who are of limited value to their particular client base.
The Chambers principle and/or more frequent referral to specialists is likely to result in a better general outcome.
Phil Billingham: I would think that this will be impractical, not least because of the potential for the lower level to poison the brand of the higher level advice.
The key is that disclosure is such that consumers know what they are getting and what the choices are. Not terribly confident that this is actually the intention, but we will see.
Geoffrey Clarkson: The Tenet view is that primary advice should not be considered as a separate category of service.
We believe in the availability of financial advice to all, irrespective of their means or status. We see a great danger in primary advice resulting in misbuying, with the individuals possibly less able to manage their affairs being given less assistance.
A properly financed and well structured IFA sector can deal with the requirements of all types of clients, provided that the regulatory regime accommodates different allocations of time to a client’s needs and is less onerous in its administrative requirements.
Kim North: I am getting a little confused about how primary advice will “dovetail” into generic advice. Otto Thoresen’s report issued last week claims that generic advice will improve financial capability across the UK, particularly the number – estimated to be around 7.5 million people – who can be described as most vulnerable to the consequences of poor financial decisions.
The benefits have been calculated as outweighing the costs by 3.5 to 1. Running costs are estimated to be £40m to £80m but could be much higher than this, to be funded by the Government and financial services companies.
The national generic advice service will be completely impartial and the reliance on effective marketing will make or break the service.
If any of my friends asked me, should I go to my local bank to get some primary advice and then buy some of their simplified or stakeholder products to secure my financial future, I would be morally obliged to point out that there is usually only one provider’s range of products, many of these underperform and, in the postRDR world, the products will be relatively expensive.
Primary advice may work in specific areas such as protection and health insurance also known as risk insurance as there is no reliance on investment performance, just product pricing.
I would happily recommend the concept of impartial generic advice where clients are pushed to price and performance comparison platform to choose what they want or it is made easy to get access to impartial advisers where their financial needs are more complex. But primary advice not being overseen by experience IFAs in the pension and investment areas makes me very, very worried.
Richard Hobbs: There seem to be too many tiers of “adviser” in the FSA proposals. It is not clear why less well-off consumers should receive nominally less protection by seeing less qualified advisers. I would distinguish between two categories of customer – those with simple needs and those with complex ones.
If your needs are simple, – clear debt first, protection before savings – there is not much advice to give, this is a selling process. Those with inheritance tax and capital gains tax issues to manage need expert advice. These seem to me two distinct markets that should be treated as such by the industry and regulator alike.
Mark Twigg: The primary advice function is designed to broaden access. As long as it is clear that this is the only type of advice which will be given, it will avoid the confusion which consumers can experience in the current system.
There is therefore no fundamental problem with an entity restricting itself to this type of advice. Where primary advice is appropriate for the consumer concerned, the involvement of certified or chartered financial planners would add cost but no real value.
The question implies that “practice management” should only be carried out by CFPs of either variety.
The experience in the legal and medical professions provides ample evidence that those with even the highest levels of professional qualification are not necessarily suitable in this role and employ those with strong management skills which professional practitioners often lack.
In reality, the majority of CFPs are focused on providing higher levels of advice to clients. With so few qualified at this level that is where they can add most value.
Brett Davidson: The establishment of primary advisers sounds like a good idea in principle, segmenting advisers by name to allow clients to more easily identify the type of service they want.
In practice, however, I am concerned that legislating what a group of advisers are called could easily see consumers where they are now – that is confused.
IFAs are named collectively as the purveyors of independent advice when, in reality, some act only as mortgage brokers while some provide professional financial planning.
I think it is up to each advisory business to begin to differentiate and brand its services so that clients understand what is on offer. Wishing for the FSA to do this is abdicating responsibility.
Adam Samuel: Nobody is going to offer primary advice for any length of time, any more than they did basic advice. Providing sub-standard advice, which can only be done using a Mifid opt-out, should not be allowed at all. It is a case of bad shoes for poor people.
Money Marketing RDR Panel:
managing director, FP Transitions UK
executive, IFA Promotion
account director, Cicero Consulting
principal, Professional Partnerships
managing director, Syndaxi Financial Planning
managing director, Beachcroft Regulatory Consulting
director, Technology and Technical
partner, CMS Cameron McKenna
group regulatory director, Tenet Group