One of the very first cases I worked on when I first became an IFA was a complicated offshore investment case involving various trusts. I sat down with the compliance officer to make sure I had got the advice process correct. Having checked that all was well, then he asked me how I was going to be paid.
Lesson number one was that I had not got a clue because I had (at the time) no real feeling for how “the system” worked.
The commission options with regards to the cost of advice for that case seemed so complicated (and therefore quite tricky to explain) that I really could not help thinking that the fee route was just so much simpler. The client knew where she stood and I got paid for a good job well done.
It should be so simple. Agree the cost of the job in writing at the outset with the client and then agree how those costs will be paid. Explain the complexity of the advice if necessary and voila.
It has been said on numerous occasions in columns such as this that fees are good. I agree with this theory in principle but we all know in practice that it does not always work, however much we want it to.
I would love to work purely on a fee-only basis but given that most of my clients are going through an expensive divorce, they are normally relieved to find that there is another mechanism in place to pay for the cost of advice of their pension sharing orders, even though they do understand that, ultimately, they are paying from the pension product itself.
I have read the RDR pretty much from cover to cover and my conclusion is that our profession has been pulling itself up by the bootstraps for some time – it is just that the FSA has not given us enough credit for it. My blood was boiling by the time I read even as far as the third paragraph of the overview, which seemed to suggest that all advisers remain commission-hungry and clients do not understand anything that is put in front of them.
If an adviser has the skill and time to explain things properly, then a client will understand it. If you have a long-term, constructive relationship with a client, then they will trust you. Simple as that.
I only have to think of the advisers that I know in and around East Anglia. Most are chartered, and if they are not then they are (with the odd exception) only a gnat’s whisker away from being so. In addition, most are in professional, fee-based practices.
I would doubt that any of us deal with clients in any other manner than in their best interests, rather than our own, which is probably why none of us have a problem with referrals.
We have even got several firms together and all agreed the same hourly rate for divorce work, so that we are not in competition with each other. Are we mad? We even swap ideas and technical issues to make sure that we are at the top of our game. I almost feel like we should be doing it as some underground resistance movement.
But surely we cannot be that far removed from the adviser dynamics of the rest of the country so why do those of us who already strive to be perfect and aspire to “do the right thing” continue to get short shrift from the FSA?
I agree that there are those out there who still believe that it is possible to practice with the minimum of effort, relying heavily on the triumph of bluff and experience over qualifications.
Perhaps it is a bold move for the FSA to consider penalising those who do not make it a priority to formally improve their knowledge by restricting their working practices – it might actually encourage some to get off their backsides and move with the times.
The only people who have anything to fear from the RDR are those who cannot be bothered to progress. But we should all take note of it and speak out while we have the opportunity.
Fiona Sharp is a senior adviser at Finance4Women