I have some experience of fee charging, having created and managed a successful accountancy practice over 30 years before becoming involved in the IFA sector. The feeding frenzy indulged in by politicians and financial journalists, having died down for a while, has been whipped up again by the Treasury select committee's report. So I would like to join the party, if I may.
Repeat after me several times until you know it off by heart: “Commission bad, fees good.” What decent person could possibly argue with that? You do not have to know much about the subject, you just have to feel it in your bones. Commission is the root of all evil.
Decent people like Lorna Bourke (Money Marketing, August 12) want to do away with IFAs in order to get rid of this wretched problem. She says if only other decent people like John McFall knew anything at all about the industry and its problems, his committee “would have come down decisively in favour of abolishing all commission payments to IFAs”.
Perhaps at this stage I might humbly ask what Mr McFall and his colleagues were doing all that time if they did not find out anything about the industry and its dreadful history? Anyway, Ms Bourke has come up with the answer. If IFAs are culled, the problem caused by commission will go away because the high-street banks will then do all the selling and look after clients' investments. So there you have it, the master plan. Why has it taken so long for someone to see the obvious?
Ms Bourke further enlightens us with knowledge of what we IFAs get up to. Apparently, very few IFAs provide ongoing service to their clients. I would hate to doubt anything that Ms Bourke says because she knows more than Mr McFall, which is quite something, but I would be interested in knowing the source of this research. Nobody has asked me, by the way.
Oh, I almost forgot. I hate to spoil the party but fees do not work for the majority of clients. Fees work for certain job types such as group pension admin and other corporate work and, of course, the high-net-worth client. Our client bank is, I suspect, typical of many other smaller IFA practices and we have many clients who we value and who value us but who will not pay fees. They go white at the very sound of the “f” word.
They will have to go, of course, under the master plan. This is a pity because I do not like to think of them being looked after by that nice young man at Barclays, even if he has got FPC2. Perhaps they will do nothing, just like they did before they came to us, so that will be all right then.
One final thought. Have we IFAs done ourselves a disservice by pretending to charge fees when, in fact, in many cases we have only been offsetting notional fees against an equivalent amount of commission?
Perhaps thinking that we were earning some Brownie points, we have proudly responded to surveys saying: “Yes, we charge fees, lots and lots of fees, no problem, because we are decent people just like Bourke and McFall.”
Perhaps we were instead digging a hole for ourselves as these statistics are now being used by the CES (Commission Extermination Squad), who think that charging fees is easy.
Sanderson Financial Consultancy,