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There’s life in the IFA species yet

LibDem Lord Newby caused a storm at the LibDem conference by saying traditional IFAs were a doomed species. He says the strength of response from advisers, including 120 comments on the Money Marketing website, has led him to re-evaluate his views.

Liberal Democrat Treasury spokesman Lord Newby has changed his controversial position on the future of IFAs and now believes there is a clear, ongoing demand for high quality advice.

Newby caused an outcry among advisers after his comments at the LibDem conference in Liverpool in September when he branded traditional IFAs as “a doomed species” and predicted a shift among consumers away from traditional advice to seeking free “advice” online.

Speaking at a fringe event, he said: “The regulatory requirements on IFAs are so great, the cost of giving advice is so great and I cannot image why anyone would want to do it. It just looks to me really, really hard.

“I hope people do take financial advice but they will want it free and they will want it delivered electronically.”

Given the depth of feeling on the subject and subsequent conversations with IFAs, Newby has since toned down his views.

He says: “The old-style IFA is clearly on the way out because the RDR is changing the rules of the game a lot. But what people have been at pains to point out is there are IFAs who are getting the various qualifications and providing advice for a fee, for whom there is clearly an ongoing demand for high quality personal financial advice.”

Newby says he is concerned that the advent of adviser-charging will lead to IFAs focusing on high-net-worth clients.

He says: “In future, financial advice will be quite different from what I think of as the traditional IFA model. This may mean that while the species is not doomed and will survive, it will end up servicing more of the top end of the market than everybody else, because people lower down the income scale who might have used an IFA before will not be prepared to pay for advice.”

Speaking at the conference, Newby said in future consumers would want free “advice” delivered online. Again, he has toned now his views, admitting it will be difficult to get specific personalised comprehensive product advice solely from the internet.

Newby believes the move to the new Consumer Protection and Markets Authority represents an ideal opportunity for advisers to campaign for change on long-standing issues such as the lack of a long-stop.

He says: “A new financial architecture is about to be established. As we move towards that every aspect of regulation is going to be under debate. In these circumstances advisers have the opportunity to raise issues about the way the system works under the current regime and why under the new regime it needs to be different. It is in that context that I think there is an opportunity to raise the long-stop issue or indeed anything else that advisers wish to correct.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. I bet this man has not got a scooby doo about regulation and our industry.
    The way things are going, I would be worried if politicians have a future!!!
    They cock most things up and no one trusts them.
    Possibly they should introduce a treating customers fairly programme!!!

  2. People may want free advice online but whether or not they get good advice is another matter.

    Financial advice is not like buying a handbag, it requires the individual to think through all the possibilities and be given proper guidance on what to do. In some cases it actually means a shove in the right direction.

    If the recent figures on life assurance covering mortgages is to be believed, then financial advice online is not working. This is probably one of the most simple products to buy but how many mortgages are not covered in the event of death.

    I still believe he is out of touch with the reality of our job.

  3. The politicians should be a dying breed; they are giving their powers away to the regulators, who should be a dying breed, but seem to be given more powers without the accountability that goes with it.
    Above you see a u-turn, comment about long stops, the new IFA only looking after HNW and the RDR, the public loosing out and not willing to pay for advice, he mentions qualifications. Sounds like he has spoken to an IFA!
    What he obviously doesn’t grasp is that we are being put out of business because the bankers are driving the regulators and they have the power and money to take our market, (but not keep it long term)
    Wake up Newby you are half way to understanding the laws of (unintended? consequences) forced upon us by the over zealous over paid and over weight regulator.

  4. Ian & Bob are right.
    The crux of the matter is whether or not advice is offered.
    In all probabilty “electronic” advice isn’t reallly advice as it can’t properly “Know the Client”.

    In my opinion there should only be 2 routes to purchase financial products…..advised independently of any product provider or non-advised.

    Information giving/simple “advice” would not only be superficial but may even be dangerous to the consumer!

  5. Rod, nobody is being ‘put out of business’. Your industry is simply being asked to adhere to reasonable professional standards to help to ensure that customers are served by a suitably qualified individual.

    You wouldn’t turn up at the hospital and expect to be seen by a ‘doctor’ with nothing more than an A-level in Biology, would you?

    Mr Newby has clarified his stance, no more than that. The old-fashioned, under-qualified insurance salesman that calls himself an IFA is a dying breed. That’s a good thing for this ‘profession’ in the long run and any current practitioner who wants to keep working in the sector can keep doing so – you just have to meet the minimum standards.

  6. The problem is that the politicians that run the country (supposedly) rarely have a clue about the subject(s) on which they pontificate.

    It doesn’t matter whether it’s financial services, health, defence, policing, transport, education…….

    Just look at the qualifications (and non-experience) of some of the ministers in recent years – it’s a very unfunny joke that such people can wield so much power, do so much damage and yet get treated as if they are special in some way. Most of them are greedy, self-interested, fraudulent and incompetent twats. Worse still, some of them actually think that they’re doing a good job !

    And now, most of them are completely surplus to requirements – redundant ! If the European Parliament and European Justice system (with their Human Rights Act) are
    able to run roughshod over our own laws, taxation system, immigration policy………why do we need 650 MPs ?

    As intimated already, Parliament and MPs are an unnecessary drain on the pockets of hard-working tax payers and getting rid of 600 MPs would be a good start in helping to reduce the budget deficit. I feel sure that any MP reading this, being so public spirited, will resign (ha, ha).

  7. Modest NW clients may not at present be prepared to accept that advice, if it’s worth anything at all, must be paid for but we, as an industry/profession, have to change that. If potential customers contact half a dozen IFA firms and every one of them states that they are not prepared to undertake the work required on a purely speculative basis in the hope of getting paid some commission a few months down the line, then eventually the message will start to sink in.

    Firms still clinging to the old model of dressing up the sale of a product as advice and running scared of stating that true advice requires the payment of a fee are, as I see it, holding back the industry’s much needed evolution towards becoming a profession.

    Charging a fee for advice is often not an easy sell, but it gets rid of the timewasters at an early stage in the proceedings, it constitutes a clear commitment on the part of the client to what you have to offer and you still get paid something even if no product is ultimately implemented. Do you get a house survey or preliminary legal work FOC even if you don’t buy the property? Of course you don’t. So why should you provide all your pre-sale financial planning advice FOC?

  8. If the regulatory process and associated eye watering costs for both Providers and Advisers is not sorted out fast there won’t be much infrastructure left appart from interned based sales.
    Look back over the last 12 years,in excess of EIGHTY…….yes EIGHTY life companies have ceased trading in the UK, many having been houshold names and trading for many decades, being the life blood for training new advisers who went on to set up their own IFA practice or providing straight forward advice as life assurance Advisers. The number of Advisers has also dropped in excess of 70%. If another 12000 IFA’s leave the industry and the remaining have to focus on high net worth clients where does that leave 85% of the UK population. What a mess! and RDR alone is going to cost £1.6 BILLION…… We will be left with less than than 6 major Life providers by 2012… BUPA as a life brand will be the latest to go. In a couple of years there will be a parlimentary meeting to find out happened to the network of UK financial services firms and how it can be rebuilt to enable people with incomes below 60kpa to get face to face advice.

  9. There is one thing worse than being talked about and that’s not being talked about! Lets capitalise on the recent political interest in RDR and make a renewed call for a debate in the House with support from the new convert to our cause Lord Newby. It might take some pressure off the Lib Dems over their university fees U turn. This time lets ensure that the supporters of a motion are properly briefed by practitioners and not so called trade body representatives who do not appear to understand the industry and the issures it faces.

  10. Jennifer Nicholls 5th November 2010 at 10:55 am

    Alan, you have obviously no idea how many exams we already take every year and how many educational seminars and CPD hours we undertake. A couple of years ago Ichanged my network and took 17 exams just to join the new one. I am constantly improving my knowledge after doing the job for 20 years only to be told I am disqualified. It’ jolly hard to run a business and support 3 university kids on my own. I don’t mind taking exams as they are quite interesting especially the ones that have nothing to do with my job. It’s obvious the people setting these exams think we are stockbrokers selling derivertives. It’ the timescale that is threatening our livelihoods. I need to have a regular income and can’t stop working to study within these timescales. Plus they are expensive and no one is sure that they won’t do this again in a few years. Imagine the outcry if all solicitors were also disqualified.

  11. I can get all my political news and analysis online before I vote. Never had any help from a politician.
    Where is the help for the low income earners. It is ok for fat cat politicians.
    Unless the financial services industry including the regulators and politicians comes up with a solution to provide a cost effective advisory service to the majority of the population those who are from the lowest socio economic (LSE) group will be left unadviced.
    There are many statistics about the failure of the current system to help the LSE group to achieve better advice. Many rely on the CAB (citizen advice bureau), however, this advice is limited and often provided by unqualified volunteers.
    Only 10% of students from poorest 20% of the population in the UK acquire a degree by age 23, compared to 44% from the richest fifth of the population (Sutton Trust).
    In the UK in 2007–08, there were 13.5 million individuals in relative poverty measuring incomes after housing costs (AHC) and 11.0 million measuring them before housing costs
    (BHC), using a poverty line equal to 60% of median income.
    The are also the most knowledge poor and require the most right advice. Most politicians talk the talk about helping disadvantaged but rarely walk the walk,

  12. I’m new to the industry and I’m quite happy to be qualified and do more exams.

    But I do really think the regulator has parts of RDR wrong. A lot of people will just not get good advise as for them paying up front will not work. A lot of people do not want to or can use the internet so that style of advise will not work.

    As I’m New can some one tell me why we have got so far without the thoughts of the independent sector being taken in to account?

    Has the passed miss selling really damaged our case??

  13. I find online advice a disgrace.
    I have had many clients that have considered using online for life cover as lets face it it is easy to carry out.
    How many clients have taken out a high sum assured and not realised that by not putting it in trust it will cost them thousdands in IHT tax if they die. To save a few punds could cost them thousdands.
    I wonder how many applications completed online re medical details will breach the utmost good faith principle??
    There will be hundreds that will give incorrect information purely due to lack of knowledge.
    So why do the FSA still allow this. That is not treating customers fairly.
    How many investments carried out online are not suitable due to risk etc etc.
    Again that should not be allowed.

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