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RDR must bring back the pride

SimplyBiz managing director Ian Thorneycroft calls for a return to traditional values in financial services

As readers will know, I have been away from work since February with cancer and hope to be back next spring. I took a night off from the treatment and all its side-effects to support Aifa at its 10th anniversary dinner. It was good to see so many people there and my fellow directors at Aifa, all of whom have been unstinting in their support this year – they reflect the strength of the community we work in.

John Gummer’s speech was inspiring when he reminded us that putting the customer at the heart of a business is the only true measure of professionalism. However, as I listened to groups talking about the RDR and the likely consequences, I grew increasingly uncomfortable.

There were many leaders of the life industry and our profession there who seemed to think that if a few thousand advisers could not meet the arbitrary date for qualification, then it would be less competition for the survivors and just bad luck.

Others seemed to think that increasing their annual fee to at least 1 per cent on top of additional charges for their own admin system was morally superior than taking a commission, which, over 10 years, would actually have less detrimental effect on the investment.

True the die is cast, as it probably was from the beginning. When I saw the composition of work groups that the FSA formed two years ago, I was struck that only two of the 42 people were from small IFAs.

From Ned Cazelet’s rapid-fire presentation and Callum McCarthy’s “The industry is broken” speech, it was obvious that life companies could no longer afford to keep buying businesses, especially when IFAs were using the same weapon against them by refunding it to clients to make up for the woeful miss-management of with-profits funds. So the FSA have done the job the life industry never had the bottle for.

No one can argue about the need for competence, particularly in the fast changing world of financial advice, so I welcome the drive to higher standards. However, we need to ensure we use all means possible to assess that competence, as is the trend with education now. Relying just on an exam will fall well short no matter how much the educational bodies are able to charge.

As I ponder my return next year, I worry about what I will be coming back to. I started in financial services in 1976 with the building society movement. It was a simple business then – and growing. I remember well the enormous satisfaction and yes, pride, at helping people buy their first house and the tremendous effect it had on me when I delivered a life insurance cheque to a grieving widow and her daughter in Hull.

The building societies continued to grow on a simple premise. Life insurance was very much the same, with over a quarter of a million representatives inculcating a savings culture into society.

Now building societies are all but dead and the life industry shrinking.

You only have to look at the press to see the misleading headline rates for savings and the seemingly endless hidden charges to see why. They have lost the trust of most and deservedly so.

The City has gone the same way, with risk upon risk taken for short-term personal gain at the expense of ordinary savers. So perhaps you can understand my concern about IFAs.

The new paradigm is to seek wealthy individuals, put them on a wrap – despite the extra expense – and sit back and seek to increase their annual “fee”. In the last five years, I have never seen a single piece of research into consumer attitudes to wraps.

The new mantra is funds under management and most flock to the altar. I am a reasonably wealthy person and yet my wealth would have been devastated by the cost of the chemotherapy that I cannot get on the NHS. The need for protection has never been greater, whatever the socioeconomic.

The need for advice has never been greater and yet most talk about ditching “unprofitable” clients. Our own professional bodies talk about culling older IFAs who cannot cope with exams. It is also worth reflecting on the Conservative promise to replace the FSA with a consumer body rather than an institution run by and for the banking community.

Can I make a plea among the inevitable wave of change? Let’s not go the way of others and lose the trust we have worked so long to earn. Let’s talk less about each other and more to each other. Whatever model we aspire to, let’s make sure the customer is at the heart of it and not pour disdain on others who choose a different, but just as viable, model.

Let’s also ensure that we provide an example to people starting with us. My own son has recently started as a trainee IFA and I want him to be inspired in the same way I was all those years ago.

Everything we do must be led by retaining every competent adviser we have and offering the best service we can to as many as we can. Whatever happens, I look forward to winning my own battle and returning to a profession I can be proud of.


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. Ian

    Welcome back, good to hear the treatment is going well….hope you get the all clear soon and I’m sure Ken will be glad to get you back.

  2. Welcome back Ian in the true Ian Thorneyucroft style.

    Many a true words spoken which I for one fully support.

    Nat Parmar

  3. Well said Ian – speedy recovery.

  4. I am delighted to hear from Ian and I am sure we all wish him well in his fight against cancer. I look forward to seeing him in the Spring.
    As for the article – it seems that some time away from the day to day business allows one time to reflect and Ian’s words are inspiring.
    Thanks Ian.
    One of the good guys in our profession

  5. What a shame that no one at the FSA will take the slightest notice of any of this because the FSA considers itself always to be right.

  6. Good to hear from you Ian. I know you have been fighting your own battles!

    I’m not sure we need to return to traditional values, as many of us have never lost these! What we need is a regulator that respects advisers with traditional values and allows those advisers to remain in business post 2012.

    John Gummer’s speech may be inspiring but in the future he may be making such speeches to an empty room!

  7. Ye Gads – yet more empty rhetoric and flowery sentiment with which one generally can’t disagree.
    But as always no substance. There is no substance in any the RDR literature and there is no substance in any of the industry responses.
    What we have are miles and miles of vacuous phrases of how we will all be better if we behave better.
    Yes, we all believe that better training should make advice better. But it’s not an inevitability.
    E.g. the geniuses that put together the derivative packages that have brought the World to its economic knees are probably better trained than any of us – and aren’t we all glad of that.
    A contributory cause of the financial crisis appears to have been the artificially low interest rates in the US of A, held at that level to encourage growth. And postulated by some of the very brightest people around. And it brought growth – some of the highest negative worldwide growth ever seen.
    So education is not inevitably an improvement, as is so often assumed. There are so many other aspects of a commercial market so we need to consider the “unanticipated consequence” a little more closely.
    Instead of going for Big Bang all the time, lets take a leaf out of the Porsche handbook and build on the best parts and remove the worst.
    This means we actually have to define what is good and bad within the financial industry, and I cannot see that such an analysis has ever been undertaken on a systematic basis.
    And just because a person doesn’t like something doesn’t automatically mean that it is bad. Alternatives could be a lot worse. So perhaps we also need to embrace the concept of “least damaging”.

  8. It’s easy to pontificate as to the type of clients and services IFA’s should or should not provide to clients when your business recieves 2.5% of 5,000 plus IFA’s Buisiness turnover. The reality is all IFA’S need to run a profitable business. If that means shedding unprofitable clients than so be it. Satisfaction and pride are not a requirement of the FSA or needed to complete a Tax Return.

  9. Good to hear your views Ian. It’s hard to disagree with anything you said and I wish the powers that be that reside in the land of Canary Wharf would listen to your message. Alas I don’t think they really give a damn! I wish you well with your ongoing treatment and a full recovery. The fight you are facing now puts our battles with RDR in prespective I suppose!

  10. Although aspiring to greater academic proof of competency appears to be progression to better professionalism, it won’t be any use on it’s own.
    Having started in business during the 1970’s and achieved all required qualifications it is hard to define how this has improved customer confidence and trust. My clients continue to deal with me rather than “the highly qualified” and this is because our relationship is based on trust.
    If those in power really want the savings, pension and protection gaps to be adressed the lack of consumer confidence in them will have to be resolved; so getting me, and others like me, to achieve ever challenging academic qualifications will not, of itself, achieve the desired result; not least because it will mean we will all have to spend more time away from clients instead of going to see them, which is my real job!

  11. I can only agree with every word that Ian has said. Ian has seen it all – in his career, as a policyholder and as the father of an aspiring adviser. He is truly one of the great guys in this business and his words should be heeded. I wish you well, Ian, and look forward to seeing you back to a scene where your brand of common sense is sadly not so common.

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