Harry, you won’t be surprised to hear, was extremely supportive of this document and he chided me for my cynicism. Perhaps more important, he asked a telling question: “When are you going to stop criticising on the sidelines and come up with some serious proposals yourself?”
That is a fair question, the answer to which is that my job as a columnist is not that of coming up with blueprints for independent advice but to offer my views on what other people are doing and look at common industry debates with the occasionally jaded viewpoint of a consumer journalist.
That said, there are some things that Aifa’s Chris Cummings and those he has worked with, including other trade bodies and senior industry figures, deserve serious praise for.
One is to demolish – with one sentence – one of the key intellectual planks of the first version of the retail distribution review published in June last year.
The other is the potential simplification of the regulatory landscape for IFAs, as emerged from the RDR’s interim review this month.
Specifically, what Chris criticised was a proposal in the original RDR for “independent advice” to be determined on the basis of whether a genuine IFA was remunerated by means of a fee or commission. Yet no distinction, in relation to formal independent status at least, was being made between a whole of market adviser and a multi-tied one.
When someone comes up with a ridiculous idea, sometimes the only way to respond is by making sure that you highlight how absurd it is in one telling phrase. In this instance, Chris summed up the proposal as one where the title IFA was being defined not by quality of advice but by how the adviser is paid. An industry insider with access to regulatory circles later told me that this pithy remark had a major impact among key players in Canary Wharf.
I was reminded of this comment by two events last week. The first was a seminar organised in London by Scottish Life, now part of the Royal London Group.
Among the 50 or so IFAs who attended what was striking about the discussion was the sense, certainly expressed by Royal London’s head of corporate affairs Gareth Evans, that the RDR in its interim form offers great opportunities for IFAs who are able to seize the initiative.
Coupled with it, of course, is the danger that large sections of the middle market for advice may be crowded out because they will no longer be able to afford to see an IFA.
The second reminder of the way in which the nature of the debate has changed so very dramatically in just the past few weeks came from a story in Money Marketing last week, in which it was reported that Towers Perrin is claiming that tied or multi-tied advisers can deliver a better service than whole of market advisersThe firm’s insurance consulting business Tillinghast says the structure envisaged in the RDR interim report contains “significant flaws which will both inhibit the raising of standards and limit the availability of advice”.
Towers Perrin says: “We believe that choosing a product from among competing providers is a relatively small part of the adviser’s service and are concerned that the FSA’s proposals do not appear to recognise or encourage this wider view.”
The firm not only criticises the FSA for failing to understand that advice can be delivered to a high standard by tied or multi-tied advisers but also claims tied advisers can deliver a better service in terms of both outcome and cost.
Now, at one level that is true. It is also the case that good financial planning is not necessarily about selling products. Moreover, if product design is increas-ingly becoming similar, is it not right to focus more on the nature of the advice being given than whether it comes from a whole of market or a tied adviser?
The problem with this argument is that while it is probably right that product choice is immaterial much of the time, inevitably, there comes a time for every client where a decision needs to be made that involves a choice between distinct product options. A tied agent’s product may well be decidedly inferior.
But if the underlying quality of advice from a tied agent is superb, is it not unfair to relegate him or her to the status of salesperson, as envisaged by the interim report? It probably is, to an extent. At the same time, we should also remember how small the proportion of tied agents is who are affected.
Moreover, if financial services practitioners want to gain the public’s respect and confidence, it requires them to accept that there are times when sacrifices need to be made.
Telling a few dozen, or even a few hundred, highly-skilled tied and multi-tied agents that they need to offer whole of market solutions to their clients if they want to retain adviser status is a very small price to pay along that road.
There, Harry, happier now?
Nic Cicutti can be contacted at firstname.lastname@example.org