View more on these topics

Two-way education

All advisers must unite to fight the catastrophic plans in the RDR

In my first two columns, I highlighted the inadequacies and fundamentally divisive elements of the retail distribution review.

It is easy to be negative and attack a range of suggested changes (no matter how ill considered they may be) without putting an alternative viewpoint and I under-stand that such actions do not assist the argument.

The only valid starting point is financial inclusion. How to insure the uninsured? How to persuade the reluctant to save and how to convince the majority that what they have done thus far is actually inadequate?

Commentators have noted that the death of the door-to-door salesperson disenfranchised a sizeable section of the population. Other people fail to seek out advice from fear or distrust while others do not have the knowledge or even the common sense to look to their future or to family protection.

Education is a two-way process, the means of education has to be made available but the uninformed must also accept instruction. Sadly, too many would rather pursue immediate comforts than spend time and effort on matters such as mortgages, insurance and pensions. This is nothing new although the financial exclusion gap is widening.

Consumers continue to go wildly into unrealistic levels of personal debt and otherwise sensible people ignore dire warnings and evidence and continue to smoke cigarettes. There is only so much that education can do.

For many consumers, the distinctions between independent and tied, good and bad, inexpensive and expensive is illusory. Despite repeated rip-offs, many still hold a form of loyalty to their bank and fall prey to the entreaties of target-driven “customer advisers”.

In the prehistoric days before regulation and the informed negativity of newspaper columnists, the financial world was a dangerous place for the unwary. Providers designed opaque and confusing plan structures which minimised the early values of savings plans, leaving a legacy of distrust.

This dreadful aspect was swept away by regulation, as was the direct salesman who was typically unleashed on the poor consumer having completed an obligatory 10-day training course.

The high-charging plans are gone, along with the dodgy salesperson but this victory of sorts claimed an innocent bystander – the door-to-door salesperson from the industrial life offices. Prudential, Pearl, Liverpool Victoria, Royal Liver, Royal London, Refuge and United Friendly all withdrew from this segment and this left the low-earning consumer with no conduit towards financial advice.

The industrial branch plans offered many people an introduction to a simple form of financial advice and enabled them to progress towards appropriate inde-pendent financial advice. It also served to provide the start of a career curve for budding independent advisers. The sector’s demise has had repercussions on the financial advice outlets available to the very consumer segment targeted by the RDR proposals. It also depleted the pool of many potential independent advisers.

Consumers get their financial education from independent advisers who are often paid by commission. Primary advice will provide advice of sorts and also some kind of basic product but, like a car with three wheels, it will not meet requirements and will not be as effective as whole of market advice.

Commentators have pointed out the potential for confusion and the nonsense of the suggested adaptation of the word independent.

While the Personal Finance Society untangles its knitting, both the IFA Defence Union and Aifa have been highly vocal in their opposition to the proposals. They have identified the conceptual weaknesses and the bias towards bancassurers best epitomised by FSA director Thomas Huertas’s speech to the Institute of Economic Affairs in June.

Many advisers have positioned Aifa as the Neville Chamberlain of the financial services world – upstanding and well intentioned but too quick to compromise and too overly intent on walking the well trodden path of appeasement. Chris Cummings has recently sharpened his teeth but it has generally been left to Evan Owen and the IFADU to take the Churchillian approach.

Independent advisers are often too busy to bother with regulatory mind games and are generally too individualistic to be corralled into some unified force. However, it is essential that on this occasion, all advisers put aside their other pressing concerns and unify to fight the potential catastrophe represented by the RDR.

Alan Lakey is a partner at Highclere Financial Services

Recommended

Repricing returns rates to reality

The recent repricing by non-conforming lenders will see sub-prime mortgage rates return to a sensible level after months of rates being too competitive, says John Charcol senior technical manager Ray Boulger.Boulger says that although sub-prime borrowers will be feeling the effects of the latest rate increases after several major non-conforming lenders repriced last week as […]

Phoenix offered to introduce IFA clients to rival adviser

An IFA has slammed Resolution-owned Phoenix Life for targeting his clients and offering to introduce them to a different IFA firm.CPD Independent Financial Advisers principal Alan Parkinson says he was surprised and angered to receive a flyer from Phoenix sent to him and his client, advertising its introducer agreement with AWD Moneyextra.When Parkinson raised objections […]

Manor park explores protected markets

Structured product provider Manor Park has introduced a version of its guaranteed global growth fund that is linked to stockmarkets in China, Japan and Hong Kong.Guaranteed global growth fund October 2007 Series D is linked to an equally weighted basket comprising the Hang Seng, Hang Seng China Enterprises and Nikkei 225 indices for five years.Investors […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com