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Professional planning

A fundamental shift in Government policy is needed to introduce greater flexibility in pensions and between tax wrappers if the mass-market advice market is ever to be served properly, says the Personal Finance Society.

Speaking to Money Marketing at the PFS conference in Birmingham last week, new president Robert Reid said the Government and FSA needed to be bolder to address the problems that the retail distribution review is trying to resolve through primary advice.

He says the regulator is going about things the wrong way round by assuming that products in their current form can service the needs of the primary advice target group.

Reid says: “I want to improve standards in the industry, I have always wanted to do that and we have a great opportunity now but we have got to engage in the debate.

“We have got to challenge when we do not think it is right and it might be unpalatable to Mr Brown and Mr Sants but I am not here to stay quiet. If I think that what they are proposing is going to cause consumer detriment or reduce professional standards, then I am the last one to shut up.”

He says the PFS’s work on mass-market financial advice with the Citizens Advice Bureau has shown that these advisers are being asked very difficult, detailed questions by the public. He says skilled advice is needed to service these people and doubts whether phone advice would be sufficient.

Reid considers that if mass-market advice is to be successful, the Treasury needed to investigate reconstructing tax wrappers to allow the ability to move funds retrospectively from one wrapper to another.

For example, he says a person should be allowed to move money accumulated for three years in a personal pension into an Isa, provided the tax relief is paid back, if the investor realises that this may be a better move.

Reid also says new flexibilities such as borrowing from pension funds would help to counter the locking-in effect that puts off some people from saving.

He believes that generic and primary advice are inextricably linked and should be thought of in the same breath as any mass-market advice below diploma level.

Reid acknowledges that he is taking on the presidency at a time when the PFS is facing huge challenges due to the “seismic shift” that will be caused by the RDR.

He says the PFS must ensure it dignifies different levels of advice and that there is no judgement on advisers taking routes such as primary as long as they conducting themselves professionally.

In suggesting a six-year window to become qualified to diploma level, he believes that the PFS is taking a realistic view of the market.

“Realistically, a lot of firms will take a little longer to take exams than would be ideal for various reasons. We have got the statistics, we know how long it takes people to get through exams,” says Reid.

Another challenge facing the PFS is the prospect of taking on the responsibility of being a professional body in a world where membership of such an organisation may be mandatory.

Reid says with around 25,000 advisers currently members of a professional body out of a potential 60,000 advisers, the RDR could herald a change of pace for the PFS and others.

He says when the FSA firms up its plans, there is likely to be a steady build-up of advisers joining professional bodies and getting better qualified. He believes the PFS could comfortably double its size from its current level of around 24,000.

He says this increased volume, coupled with support from providers, would help with issues such as running more frequent exams and providing the organisation with the extra resources it would need.

In terms of policing the sector, Reid believes that while there will be more than one professional body there should only be one standards board.

“It is essential that there is only one board across the industry or disciplinary matters could turn into a joke with an adviser struck off by one body but allowed to work through another,” he says.

Reid says the PFS would not have a problem with formally splitting from its Professional Standards Board if this made it more palatable for others, such as the Institute of Financial Planning, to use.

The PFS’s standards board is currently run independently by a lay chairman. Last year, 60 advisers across general insurance and financial services were disciplined by the board, either losing titles or being ejected from the organisation.

Reid himself is a certified financial planner, as well as being chartered, and hopes his good relationship with Nick Cann and others at the IFP will lessen the tension that still exists between the two organisations.

He says: “I want to ensure we have an adult relationship with them. I have a lot of time for Nick he is a very effective chief executive and I have no doubt we can work well together.”

Reid believes there is plenty of scope for joint ventures between the two organisations, for example, running conferences together on professional standards, as well as working together for a single board.

He says that the PFS will be working to promote charted status with the public in the coming year and his key message to members will be to ensure that people understand the value of advice.

“People using the phrase free advice just devalue what everybody is doing. The customer is not daft, they know somebody is paying someone. Many advisers keep their true value a secret. We need to keep convincing the regulator, the Government and the public of our value at every opportunity.”

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