As financial planners, we obviously recognise the benefits of a structured approach. This is far more effective than any form of reactive management.
It is also fair to say that if we are to commit our clients to long-term saving with a particular provider then we need to be in broad agreement with that provider's strategy and be reassured it is not going to change suddenly.
Only a few months ago, we were being told by Norwich Union that it was the leading stakeholder provider. This was no surprise, given the ever-present NU advertising. It had secured a market share of over 20 per cent and went on to conclude from this success that:
“Our multi-channel distribution approach, coupled with our brand str- ength and broad product range, makes us well pla-ced for changes in regulation resulting from the polarisation review.”
Then, three weeks ago, the headline read as follows, Upheaval could see CGNU turn from UK. This was prompted by a statement which stated:
“There are a number of rule changes going on in the UK. Some of the proposed changes will support an open marketplace and professional advice. But there are risks in the legislative changes. They could lead to concerns for the overall profitability for IFAs and providers, which could be further undermined by the changes. This could lead to markets outside the UK being more attractive.”
I accept that it was not just regulations in the financial services sector, which prompted this comment but nonetheless depolarisation was a key element.
Last week saw NU announce: “The Lautro scale was designed before the 1 per cent charge cap. We are adjusting the Lautro scale so it is more appropriate – but that is not to say we are happy about it. This has been forced on us. All providers are in the same boat.”
So, stakeholder was a success and then it was not, depolarisation was no problem and now it is a problem.
With the biggest provider in the UK market making such rapid U-turns, the IFA could be excused for being confused. Or is this a form of rearguard action to increase the 1 per cent cap and put CP121 on hold?
The roots of these problems lie in the relatively quiet acceptance of stakeholder terms by the ABI and many of its members, which has, as predicted by many, come back to haunt the sector.
The banks have most definitely taken the lead on both key issues as they saw the 1 per cent as the ideal way to reduce competition. The depolarisation of the market allows them the chance to compete without the need to embrace independence.
As we now consider which products to select for clients, such contradictory comments or at best a reversal of position do little to instil confidence in the providers of packaged products.
It is not my intention to pick on NU, as I believe it is simply the first provider to comment critically on both of these two key elements of the market, albeit belatedly.
I believe we will see more providers join NU in reducing commission and voicing fears over depolarisation. If the packaged product providers cannot make 1 per cent work and fear the new market, then the IFA may need to make alternative plans. We do not need any more surprises – we need to go forward in partnership with the providers or otherwise look elsewhere.
The IFA of the future needs robust commercial relationships – the casual approach to date is just not suited to us in the future.
Robert Reid is principal of Syndaxi Financial Planning