When the Independent Financial Anxiety report was published by Durlacher, I marvelled at some of the price/earnings ratio figures which applied to the new rapid-growth IFA practices.
For those of you not given the chance to read what gave me more laughs than the Beano, the p/e ratios ranged from 40 to 400.
Four hundred is even higher than at the height of the dotcom boom and is a reflection that rather than investing in these firms, we should be running a sweep to see who hits the wall first?
Last week's Money Marketing saw a leading IFA drop an investment manager who had invested in one of these loss-making businesses which has already begun to lose some of its higher-profile members. The reaction from the IFA firm which received the investment was to suggest that the dropping of the investment firm showed a lack of loyalty to the IFA sector.
This is not the case. What the action demonstrated was that healthy scepticism has merit. Until these businesses move into regular profit, they should get out there and get the business. I have always believed that you should push your success and not your intentions. The industry needs to receive external investment but this should not be seen as a substitute for cashflow. Ultimately, the test has to be profit and this means making each RI profitable in their own right.
Can I invite all these businesses to publish their prospectuses more widely in case they have found the answer that the rest of us have missed?
Earlier in the week, I found myself listening to the radio and heard that Ann Summers is thinking of stretching its brand into financial services. Perhaps this is what David Severn at the FSA has been waiting for – forget decision trees and move on to selling using the tested Ann Summers' party approach. I just cannot wait to see the financial aids with or without batteries.
But talking of new ways to promote saving, I recently took part in a roadshow for a leading IFA service provider where we, the panellists, were asked to suggest what one thing we would alter about the financial services environment.
As usual, there was the call for clarity but I favoured the idea that all regulators and policymakers at the Treasury should be forced to work with an IFA for at least one month. They could fin-ally understand just how we operate and how the public rely on us when facing issues in their life.
The disconnection between policy and practice continues to grow and must be addressed if we are to reduce the savings gap. This means looking at things from the consumer's perspective and not from that of the industry, Government or regulator. We need to have focus groups that reflect those who we are trying to convince and not those who like a night out to talk finance.