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Structural improvements

out all the answers without such a new tool. But it is intriguing to note that it is only now, 20 years or more after with-profits really took off, that anyone is bothering to create something that will make it easier to give good advice in this area.

Here’s a tip for insomniacs – forget about counting sheep. When I am trying to fall asleep, my favourite trick is to imagine I am an architect designing a huge and very elaborate house. Each time I focus on a different minor problem, structural or decorative, and try to work out how it might be resolved. Soon, I am snoring away.

Were I a financial adviser, I might focus on other things, for example, how to improve the service I provide to my clients. Now, I know that for many IFAs this is a totally unnecessary thing to bother reflecting on, given the good service you already deliver, but bear with me.

It seems to me that there are three main areas where an adviser can add value to the client relationship. The first is by giving truly marvellous investment or pension-related advice that ensures a client’s portfolio somehow manages to beat all major indices. To be honest, that is a fairly unlikely scenario for 99 per cent of IFAs.

The second is to be the best deliverer of information. For example, rather than relying on product providers to supply six-monthly updates on clients’ policies and investments, the IFA could do so himself. This enables him to give more focused advice on how goals can be met.

The third is to improve service in areas where the adviser would not normally consider going. For example, by automatically reviewing clients’ contracted-out status and advising on whether they should switch back in. Or by providing easy-to-under- stand tax advice in all but the most complicated areas.

Last week, Edinburgh-based financial consultancy Barrie & Hibbert was reported in this paper as developing a stochastic modelling tool to help advisers looking at recommending switching from with-profits funds.

The tool will feature all with-profits policies on the market and compare the outcomes of staying invested in funds with switching into an asset-allocation model, including the net cost of transferring out of the policies.

Senior analyst Philip Mowbray was quoted as saying that the 300bn with-profits advice market is “frozen to some extent”. So it has been. To date, advice in respect of with-profits has tended to be mostly generic – don’t surrender if you can help it and keep making contributions – that was more or less it.

Of course, those willing to do a bit more research could have found p/>Of course, if your main preoccupation until recently was just to sell whatever products were fashionable, you did not need anything like this. In that respect, such tools – and a potential willingness on the part of IFAs to consider subscribing to them – are products of a new, more uncertain climate where selling products is more difficult than five or six years ago.

It is ironic, really, that a collapse in investor confidence is prompting some advisers to give better service. The difficulty for many advisers is that they will scoff at the thought that they might have to improve their service. They have reached a comfort zone where they pretend to themselves that they are delivering what clients want. In reality, they have conditioned their clients to expect far less, for the money they hand over, than they are entitled to.

In the short term, this is a workable strategy. You can effectively make lots of money from clients and give relatively little back. Longer term, there will be firms, capable of adapting better to the new environment, who will gradually mop up everyone else’s business.

It makes me wonder whether, at the end of the day, the biggest factor driving advisers towards multi-ties is not higher commission, excessive regulation or any of the reasons usually given. It will probably be other IFAs who can do a better job. Something to ponder as you drift off to sleep tonight.

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