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Value is the real issue

How disappointing but not surprising to see the Association of British Insurers drop its review on the payment of commission.

Commission will always exist in some form to reward the selling of a product. Let us understand that and move on. Let us focus on getting poor advisers out of the business and provide the support and structure for the others to change and flourish.

The argument should be about having a solid business foundation to allow for proper development of financial planning professionals.

With only 2.5 per cent of the current IFA market qualified to the level of certified financial planner professional or chartered financial planner, it shows the journey that there is still ahead of us to have financial planning regarded as a profession.

No less than CFP standard should be acceptable to demonstrate profess-ional equivalence to an accountant or solicitor.

Businesses have to be structured to allow for career development. The role of the professional financial planner has to be set out and training and education has to be aligned to support the role. The IFP, with other affiliates to the FPSB, is putting maximum priority on this exercise.

Buoyed by the reaction and feedback from the transition workshops that Brett Davidson of FP Advance has been running for the IFP, a new programme of events has been organised to provide support to a bigger group of people. Recent feedback to Aifa suggested that half its members wanted to understand how to offer a profitable fee-based service for their clients. This is consistent with the FSA-themed visits highlighting advisers using the “independent” title without any idea of what a proper fee service should look like.

The IFP is organising a one-day conference on September 14 with Aifa and FP Advance to address the fundamentals of a profitable fee-based service. The focus will be on where value can be identified and the business structures needed to be successful. Success can be achieved quite quickly, dependent upon leadership and motivation of the businesses.

Transition to a modern profitable fee-based business should be the key driver for attending this conference. Discussions focusing on the cost of investments, wraps and adviser services miss the point. Arguments about fees versus commission are futile and outdated. These are all part of the client’s evaluation process but they are secondary or tertiary issues or even irrelevant.

The primary issue is the perceived value of the advice that is provided. Cost is not the issue, value is the issue.

What advisers do must be good for clients or they will not remain in business for long. Expensive does not mean bad. If value is added above the fee, the job has been done.

First and foremost, there is a business to run and advisers are planning clients’ futures. A poor financial planner is a poor financial planner. Experienced and knowledgeable advisers deserve to make a profit and a substantial income, make a profit and create a saleable asset for the future. Achieving these objectives and delivering benefits for clients means everyone wins.

Nick Cann is chief executive at the Institute of Financial Planning

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