Joining a new trade body requires a leap of faith, admits Garry Heath, director general of Libertatem. Indeed, convincing advisers to join an organisation before it has the funding to deliver results is just one of the challenges facing Libertatem following its launch in May.
But Heath is confident the trade body will achieve its target of signing up 1,000 firms in the first 15 months. He says: “We know it will take time and I don’t expect to be really motoring until Christmas.
“IFAs tend to look at things jadedly and take a ‘we’ll see’ approach. But I believe when we get out and meet advisers they will come to the party.”
Libertatem is open to independent and restricted advisers, and is aimed at directly authorised firms. The organisation hopes to raise £1m in its first 15 months.
Heath says the scale of the challenge is less daunting as he has “done it before”, having headed up the IFA Association between 1989 and 1999. However, he recognises that the advice sector has changed a great deal in the past 25 years.
“A lot of advisers will have been in short trousers when I was running a trade association last time, so I need to get in front of them and explain what we are about,” he says.
The IFA Association was formed as the Financial Services Act came into force in 1988.
Heath says: “I was an IFA at the time and no one knew what regulation was all about. A number of local groups were established, which merged to form the IFA Association.”
During his time at the IFA Association, Heath says he did a lot to weed out unscrupulous advisers.
He explains: “People say to me, ‘you’ll protect any IFA that’s moving’. But I had my ear to the ground better than the regulator and if we received information about advisers who were doing the wrong thing, we would pass it on.
“I have never taken the view that regulation is evil but it has to be concentrated on protecting the public.”
Heath argues that the current market needs a more accountable regulator.
He says: “The major issue is that until we can get some accountability back into the regulatory system, representation is very difficult. The FCA has just increased advisers’ fees by 10 per cent but what can you do about it if the FCA is not accountable to anyone?
“At long last, we have an open door with a Conservative majority and Andrew Tyrie back in his seat at the Treasury select committee. Tyrie is keen to introduce legislation which would make the FCA more accountable and I want to help him by giving examples of where regulation has gone wrong.”
Heath cites the RDR as one such example.
“Some IFAs will say the RDR hasn’t done them any harm, and if you want to run your business in a new model way that’s great,” he says. “But those who think ‘I’m all right Jack’ fail to see that as other IFAs exit the market, the cost of regulation will be shared across a much smaller number.
“Not all advisers live in West One. If you go to places like Cardiff, the client profile is completely different and many will not pay fees.”
Heath believes simplified advice is not the answer to the advice gap, due to unresolved issues over liabilities.
Instead, he proposes a return to some form of commission, which he says would allow those who cannot afford to pay for advice upfront to spread the cost of fees.
He says: “The regulator’s argument against commission was not that it existed but that there were differential rates which determined which adviser got what business.
“We could come up with a single price system for a group of advisers, which would prevent providers from buying business.
“The fee could be added to the cost of the product and paid off by the customer over the long term. It could be collected by the provider or by a trade association as a direct debit.”
But before he can get to work on developing detailed policy proposals, Heath is focused on more pressing matters, such as growing Libertatem’s headcount beyond a director general.
“The first month has been about finding an office and having initial conversations with advisers. In the next few months we will look to hire administrative staff and a research and policy team. Getting the right people is really important – they will certainly need to understand the industry.”
Heath says Libertatem has been speaking to providers and fund managers about helping to fund the organisation.
“Providers are very concerned about the shrinking size of the sector they distribute through,” he says.
“Our conversations with advisers so far can be summed up as: ‘Thank God somebody’s doing something.’ They also want reassurance that I am not going to go native but there is no danger of that.”
Heath says advisers have been “relaxed” about Libertatem’s fees.
He adds: “It’s not that DAs refuse to pay for representation; it’s that they don’t want to join Apfa because it is not seen to be fighting for the industry.
“I had 17,000 firms as members at the IFA Association. Our big challenge is that many of them have got used to not paying, so we need to persuade them this is worth it.”
What is the best bit of advice you’ve received in your career?
Do not ruin your health by trying to please everybody – most of them will not come to your funeral.
What has had the most significant impact on financial advice in the past year?
Pension liberty: great idea, appalling delivery.
What keeps you awake at night?
Nothing for 360 nights a year – for the other five nights my brain spins like a cement mixer. So I get up and work until I feel like sleeping.
If I were in charge of the FCA for a day I would…
Concentrate on doing a few things well rather than, as currently, lots badly.
Any advice for new advisers?
Ask yourself: have I done my best for my client? Once the answer is yes, deal with the compliance.
Present: Director general, Libertatem
2006-2012: Managing director, Life Change
2003-2006: Executive chairman, Special Risks Bureau
2001-2003: Executive chairman, The Impartial Group
1999-2001: Chief executive, Portfolio Member Services
1989-1999: Director general, IFA Association
1986-1989: Chief executive, Heathland Financial Guidance
1985-1986: Underwriter, Imperial Life