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Push now for levy justice

Money Marketing likes to give IFAs the benefit of the doubt.

We believe the advice that IFAs give puts their clients in a better position than the average man or woman, whether they use their own initiative or go to their bank for advice.

We also believe that when it comes to regulation, IFAs are pretty hard done by.

Many of the actions of the regulator have been weighted far too heavily in some supposed consumer interest although ultimately, in many cases, all that has resulted is some sort of reshuffle of policyholders’ money – the case in point being endowments, particularly where retrospective standards have been applied. In these cases, advisers have had to prove what they said many years ago while clients simply have to think that they remember.

IFAs are not blameless in everything they say, do or advise.This newspaper has always felt that advisers were badly used by some providers who constructed overly complicated products in two recent scandals. The first was over split-capital investment trusts and the second was precipice bonds.

However, in the latter case in particular, IFAs should have exercised more judgement over the sort of indices that some the worst-designed products were attached to.

There may have been many collective failings but, as professionals, they should have exercised at least a little more caution and discretion than the investing populace as a whole.

That said, few would argue that product providers are wholly blameless.

On endowments, many life office investment professionals should have realised that the numbers were getting a little ambitious and strained for what the policies were intended to do.

Yet even despite this, some endowments are paying off, as recent numbers gathered from a large group of providers by Money Management demonstrate that many 25-year plans are now covering the mortgage.

None of this adds up to an appeal for IFAs to get off scot-free but having cast doubt on the balance of responsibility, it is surely unfair that IFAs, particularly as a percentage of turnover, take the lion’s share of financial responsibility from the compensation scheme.

The current compensation scheme funding system does not work and is not fair. The proposals under option B that place providers and IFAs in a pool together make sense.

But now we come to the biggest IFA fault of the lot. Money Marketing knows that when the bill for the scheme hits the doormats of IFAs around the country, the phones will ring off the hook.

We know that when you have to fork out for this scheme the cries of anguish will be deafening.

But advisers have to act now in making sure they respond to the FSA consultation and we fear they may not. There is an open door at the regulator on this issue. Advisers just need to push on it.

Currently, the Association of British Insurers is raising the issue of IFA capital adequacy as an attempt to frustrate change, a particularly cynical piece of lobbying. In all this, IFA and industry bodies are trying to make the case to change the scheme so that providers share the burden.

Chris Cummings at Aifa, in particular, is asking members and non-member advisers to make their voices heard. There are around two weeks to go before the consultation closes.

If they do not reply, then IFAs will be deemed not to care. They should support the case for change now and back up Chris Cummings now. Otherwise, when the bills hit IFA doormats in the next few years, we will as dutifully report their concerns but you will have to forgive us if our comments sound a little world weary.

The message from this newspaper on this issue is – don’t let the spin doctors at the big provider trade bodies get away with their manipulations and get off your collective backsides and make your voice heard.

Rather than ignoring it, advisers need to push now or a whole range of expert lobbiers, stonewallers, spin doctors and excuse merchants will see to it that the advice sector continues to shoulder its unfair share of the burden.


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