It may seem like a long time ago but cast your mind back to CP121, CP166 and remember that the outcome following Aifa's recommendations was the agreement to explore the concept of regulated distributors providing clients with a clearly defined menu of services which would be adopted under the FSA.
The menu would identify which sales channel the adviser represented, highlighting levels of service and remuneration.
Why a menu? Well, such a mechanism would clearly support one of the key objectives of all parties which is to better inform the consumer about the cost and services of an adviser, thereby enabling the consumer to better judge value for money.
It is now expected that the FSA's consultation paper on how the menu will operate across all forms of distribution in the financial services sector will be released very shortly.
Given this point, it is, to my mind, now extremely important that financial advisers take serious note of the forthcoming consultation paper and start to form a firm idea about how the menu will operate in their respective businesses.
The introduction of the menu should not be viewed as a threat but rather a means of enhancing and improving the relationship between client and adviser.
Issues that the financial adviser will need to have clear views on include:
How can the benefits of the menu be maximised in the sales process?
Can the adviser comfortably and effectively discuss the value of their advice and service?
Can the adviser confidently discuss remuneration via fees, commission or a combination of both?
Regarding the first point, the role of the menu should not be perceived as mechanical and not driven by procedure so that its worth and impact is lost because it becomes absorbed in some flowchart.
The worth is that it enables every company to differentiate itself and spell out what the advisers' costs represent, that is, training, admin service and product research. In essence, the success of the IFA will be in the soft skills.
Looking at the big picture, I am utterly convinced that the implementation of the menu is a very positive step. As one of the companies involved in the consumer testing, I am certainly of the view that as a sales and marketing tool, it really does add value in the client relationship and does inform the consumer in a clear way about the value of independent advice.
It is, I believe, crucial that we embrace the impact that the menu will provide in further distinguishing the IFA channel as the one that delivers real value for money.
However, as ever, the devil is in the detail and I would, therefore, urge every business to review the consultation paper and respond accordingly, either directly to the FSA or via Aifa.
For example, one of the potential “wins” is that the consumer is much better informed on the financial value of advice. The menu documentation needs to be clear and concise to achieve this aim and should not end up being bogged down by legal and regulatory wording.
If we consider that a key objective is to educate and communicate, then the ease in which a consumer is able to absorb and understand key information about an industry that has a first-class degree in technical jargon surely means that the ultimate success of the menu will lie with its transparency and simplicity.
Looking ahead, the ind-ustry continues to face one review after another. It is no wonder, therefore, that there is a body of opinion that points to the consumer losing trust in the financial services industry (as an aside, I have often queried the word services).
The menu is not the complete answer, an improvement in confidence will only be achieved over time, with all elements working in tandem. It does, however, make a statement of intent that the advisory element of the industry is serious about demonstrating its credentials and is not afraid to show its value to the consumer.
Paul Johnston is managing director at Momentum Financial Services