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Tom Kean: Independence must remain sacrosanct

Attempting to carry out work for a client without independence must be frustrating at least; disingenuous at worst

So apparently advisers add value for their clients compared to non-advised equivalents. Phew, that’s a relief.

The research released recently did not sound terribly robust and, to be honest, I did not give it too much more thought or delve beneath the surface. But it was nice to read some good news for a change.

What I personally find most satisfying is when you discover a client has done (or not done) something wrong, like not taking unreduced defined benefits five years early, or correcting something they are about to do that could result in a large monetary loss, like a tax bill.

It is easy to see an immediate margin for the client but, alas, those sorts of things never seem to get reported much.

Here, independence is important. In fact, being an IFA is a bit like having the option of retiring early.

I think it a lot when chatting to clients trying hard to build up enough income-producing assets to give them the option of retiring early – normally sometime in their mid-50s. Of course, they may not actually do it but having the choice is what it is all about, which I completely get.

And so it is with us IFAs that being properly independent is almost sacrosanct. It is the reason we try hard to remain so and why we defend its good name.

Sure, we all try and build efficiencies into our business models by using wraps, DFMs or model portfolios, or by making our processes repeatable and scalable. It is a long list, I am sure.

And hopefully the ultimate aim is to genuinely add more value to the client offering. It is what any sensible business person does (although I fear some do it purely for monetary reasons).

We know what we want and we know what most of our clients want. But what we really want, more than anything else, is the ability to go “off-piste” as and when required. It may not be often but the door is always open if needs be.

I have spoken to enough tied advisers and ex-bank staff to know there must be nothing more frustrating – or, dare I say it, disingenuous – to talk someone round to another course of action when deep down you know it is not quite what they should be doing. Good enough, perhaps, but not really the best.

As we all know, people are usually totally trusting once they have decided to engage, so it would not be difficult to explain things to an unsuspecting client to fit one’s limited offering.

Not being able to offer a VCT, for example, must be very disappointing. First world problems, hey?

So I saw with great bemusement that in a item here on Money Marketing I was ridiculed for suggesting VCTs were not only done by the reckless, and that the generous tax reliefs were a fair incentive for the extra risk someone was taking (not to mention as an alternative to a pension).

It is fascinating – and worrying – that for those of us fortunate enough to still be able to consider these things, opinions still vary quite so much.

Tom Kean is director at Thameside Financial Planning

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Another article on “independence” which misses the point. None of the “added value” examples given actually require an “independent” adviser within the narrow (dare I say “restricted”) FCA definition of the word which is limited purely to specific product advise.

  2. Robert Milligan 9th August 2017 at 4:43 pm

    Wow-be-tide any one who puts me in the same box as SJP, I’d rather shoot myself, and if I am, then please shoot me now. Independence is about being able to transact advice with any product or provider without preference, apart from those who restrict access to their own products for the use of their own Tied Agents

    • Robert, SJP is definitely very restricted but there are many shades including those that a knowledgeable client finds indistinguishable from full product independence. That’s one of the problems with the current definitions.

  3. I agree with Tom. Independence is indeed sacrosanct. Engaged clients not only know the difference, but actually seek out independent advisers. And notwithstanding current professional sloppiness, the solicitors, accountants and other professionals that referred clients to me did so not least because I was independent

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