The 1960s and 1970s saw some strange music album covers, possibly triggered by certain substances or experiences. Some covers, such as Jimi Hendrix’s Electric Ladyland, were often not openly displayed in the more conservative shops.
Which brings me to the recent pronouncement by the FSA on consultancy-charging. If you recall, adviser-charging did not suit the group market and consultancy charging was born. We then had the Society of Pensions Consultants produce guidance on what was fair and what was unfair.
This paper was the undoubted author of the problems that beset those lovers of active member discounts. Some people have suggested that active member discounts are OK if the increased charge is still under the mode charge across the sector. That is justification for a lack of thought and most active member discounts are about funding commission terms.
Now that we find ourselves with consultancy-charging landing on the “too difficult” pile, their approach on legacy was naive at best as it allowed the establishment of Trojan schemes, set up to provide access to commission after the RDR, provided that the provider does not vary their terms, as many have the power to do. This fact is missed by many seeking to take the Trojan approach, an expensive slip and a business model wrecker.
The FSA has suggested that some of these thorny issues lie with The Pensions Regulator. This is reckless and does the FSA no credit.
The real issue is that the sale of “free advice” in the GPP area has created a monster which means that any move to fees will take superhuman effort. If fairness is needed in consultancy-charging, then what happens if membership is less than, say, 60 per cent? Does the 40 per cent pay for the interaction with optouts? That cannot be fair. Plus if few join, then these costs could in some cases be bigger than the contributions being made.
These individuals need to be protected and that is the duty of the FSA and no one else. If the FSA is struggling, why not ask guys like me to help? Practical experience instead of those who spout theory is what is needed. I would happily assist and I am sure others without vested interests could too. Perhaps the best filter for volunteers is to ignore those still taking indemnity commission on new group schemes in the last 12 months.
We cannot afford to allow this to drift, moving key issues into a state of suspended animation helps no one, least of all the client. If you are still bemused by my opening, I suggest you look at covers such as Nursery Cryme by Genesis and some of the Hendrix covers. Like the FSA on consultancy-charging, they are far out, man.
Robert Reid is managing director of Syndaxi Chartered Financial Planners, Twitter: @reidremoney