There is a huge advice gap in the UK. Everyone is fully agreed on this and every week there are a number of articles lamenting this fact in the trade press. It’s an issue that needs to be addressed urgently as so many people are approaching retirement, a time when they really need to get financial advice.
There is also a general consensus that people do not see the value in financial advisers and seem reluctant to pay the up-front fees for advice that is mandated by the Retail Distribution Review. This is despite the fact that there are constant articles lauding the value of advice, particularly for those about to make the key decision about what to do with their pension savings.
However, at the same time, everyone agrees that the public should be taking more financial advice; the status of professional financial advisers is being undermined by relentless attacks in the press backed up by an attitude from the regulator that advisers are essentially all guilty and just waiting to be caught.
Since the FSA’s inception, there has been a constant stream of attacks on the IFA community and this has not abated since the FCA took over the regulatory role in April this year. Indeed, if anything it has increased with existing contracts paying trail commission coming under attack. While the FCA haven’t actually made up their mind yet, the on-going debate and numerous musings from FCA officials about the possible shut down of trail commission in 2014 is deeply unsettling for the way the public view the market.
Friends Life’s arbitrary decision to stop paying trail commission on 800 onshore bonds is very revealing. It doesn’t actually save the company much money, given the small number of policies involved, but it does show that it believes it can change its agreement with IFAs without any reference to them.
Even more amazing is the fact that it only intends to rebate it to 100 of the clients involved, via a reduced annual management charge. Friends Life will keep the trail commission paid from the policies of the other 700 clients.
However, it’s all part of a pattern. IFAs are seen as fair game and Friends obviously believe it can change the agreement arbitrarily without getting too much stick. The likelihood is that, having gotten away with this, other trail commission banks on bigger books of business will be targeted next and other providers will join in the game.
The general tone of articles discussing the issue reflects the view that IFAs have nothing to complain about; the implication being that the IFA was ripping off those customers and has now got his/her comeuppance. There’s no mention of the fact that this was part of the agreement, fully disclosed in accordance with FSA rules or that sometimes it can be better for the client to have more money invested upfront rather than have all the charges taken at the start.
As long as IFAs keep accepting this kind of attack as reasonable, their industry will remain suspect in the eyes of the general public. The regulator and the public press seem quite happy to ignore the tens of thousands of people happily using financial advice and the fact that the biggest financial scandals of recent times have come from outside the IFA sector – viz. the payment protection scam.
IFAs need to resist such attacks and stop being the whipping boys and girls of the financial services sector. Otherwise you can’t blame the public for being wary of taking advice and the “mis-buying” scandal that is looming will grow unabated.
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