IFAs have become 'low hanging fruit' - Applewood

Low hanging Fruit

I agree with Applewood that IFAs have lost their collective voice. But the reason for this is that so many advisers believe that they will be targeted by the Regulator if they stand up for their rights and try to oppose unfair working practices that are imposed upon the IFA community. Even our professional bodies appear to spend more time implementing FSA policy than examining critically the raft of proposals on which IFAs are meant to float under a range of conditions. Applewood is right: first we are plucked and then we are hung out to dry.

Posted by: Linda Hulls

Yes

RDR is not anything but what it says on the tin. A Retail Distribution Review the aim to smash the IFA market forcing all but the wealthy into the grasping hands of the banks. Who will continue to sell product of the month and not service them as there is no money in it.

Posted by: Mr Fisher

IFAs stop hiding

I agree with Linda, a most forthright person if ever I met one, that IFAs should be more vocal, but fear reigns. Are they right to fear a body that can act as judge, jury and executioner? Probably, and judging by the number of 'anons' replying to blog comments, they are afraid. Small IFAs are a very soft target as we have never really been united in any way, and whilst one can at times applaud AIFA, Alan Lakey and Evan Owen, I think we mostly agree that the powers that be really couldn't care less what we think, despite what they sometimes say. And to then find that what we though was a product provider (Keydata) was in fact in the same regulatory category as IFAs, fills me with dismay, as I am required effectively to indemnify a firm that I didn't even know I was in bed with, despite being in the vast majority of IFAs that never had anything to do with them.

Posted by: Chris Culley

whitehall farce

the money wasted on the FSA and its many and various predecessors, and on failed and expensive initiatives (eg domestic property in SIPPS), and fancy fringe benefits for jumped -up bank clerks who react instead of instigating - would all have made some compo fund eh? can anyone explain to me why, with all their powers and finance, the fsa have never instituted their own "risk rating" system? why do they not analyse companies and products? and so the farce continues - the people who make the fortunes from the business walk away from the wreckage with handsome pay-offs for their balls-up, while the IFA has to look the client in the eye and carry the can for advice given usually with the best of intent. why would an IFA recommend a Keydata product paying 3% commission if not for the client's benefit? the people who get paid to analyse failed to foresee the demise of Lehmanns - a triple aaa company as i recall - so why is the ifa the guilty party?

Posted by: david levin

FSA has 0 Credibility

The FSA cannot discipline anyone for having an opinion. Mine is they are an expensive, useless waste of money. Even if they did decide to come and visit me because they do not like my opinion they would then have to find our systems in breach. I am confident that they are not but even if they do find minor issues, as long as we put them right in a timely fashion there is no problem. I have yet to find a single IFA or indeed member of the public that thinks the FSA is doing a good job. And when I tell clients how much money this bloated and ineffective bureaucracy has wasted in achieving precisely nothing they are horrified. As, I suspect, are we all!

Posted by: Simon Webster

Those who receive the cheque

should return client money, and if they can't because they've lost it, then they should be held responsible. David is right, why should the IFA be held responsible? Meteor for example never mentioned Lehmans in their brochures, and said it had "high financial strength" even as Lehmans was imploding. Someone from Meteor told me that the FSA has looked at their brochures and said they were OK. OK? OK to describe a bank even as it is going under with catastrophic consequences as having "high financial strength" and to continue "and in the unlikely event that such an institution would not be able to meet its obligations..."?

Posted by: Ken Durkin

Keydata Victim

I read all your comments, and wonder why you would wish to offload the responsibility that your profession gladly takes on when commission is discussed. I used to be an IFA, and so know exactly how the system works. Like an independant retailer, you take on the responsibility of the products you sell. If you do not satisfy yourself that the product meets the perceived quality then you should not be in business. As a victim now of Keydata, I did what research I could, as a consumer, but my IFA had far more up-to-date information that, at the time of signing me up, he was making a decision between advising me of the problems associated with the business structure or taking a chance, in favour of his commission. He took the latter. The consumer's first line support is the IFA, so the IFA must shoulder the first line of responsibility. If that IFA then believes the 'manufacturer', or some organisation in between, is responsible, then it is for the IFA to take redress against that party. And so on to the top. You are happy to take your generous living from this industry - be prepared to pay for it when it goes wrong.

Posted by: Tony

Within FSCS limits

Keydata was regulated by the FSA and is now in "default". IFAs would surely mention the limits of the FSCS and not encourage investments above those limits. "Keydata victims" must be those who invested more than the FSCS covers. Tony, if you used to be an IFA you would have been aware of the limits, so how can you describe yourself as a "victim"?

Posted by: Ken Durkin

Regulator Not Fit to Regulate

I agree with much of the sentiment here particularly Simon Webster. I run a specialist regulated company but have stopped advising pensions and investments because I have lost faith in any of the information provided by the product manufacturers, the product analysts and the FSA that regulate them. I wonder if this is why Tony gave up as an IFA but thinks that remaining advisers have any better hope. The FSA is suppossed to regulate the banks but those in the ivory towers dictating strategy and policy have no idea or understanding of the risks the banks were taking every day. Not only has Simon identified the vast amounts of money they have wasted they have failed to protect anybody in this country because we will all be paying through taxation for the governments bailout due to FSAs failure to stop the banks gambling. I advise a government ministry on Financial Services matters and it never ceases to amaze me that senior government decision makers are making decisions based on executive summarys rather than any in depth knowledge of relevent issues. What is more alarming is that some of those executive summaries emminate from extremely lowly officials with no peractical experience whatsoever. joined Forces

Posted by: Paul Smith

There are other low hanging fruits

There are other low hanging fruits, who are feeling the sharp end of the stick. namely Members of Parliament, in particular your own Member, write to them and forcefully get your point across,GET YOUR FRIENDS AND FAMILY IN ON THE ACTION, MP's are very aware and good listeners pre election.

Posted by: M J Winfield

Well Done Karl!

Karl has articulated what the vast majority - if not all - IFAs believe. That the FSA cannot regulate. It is now trying to regulate to stop what has already happened - the aim, guys, if you're reading this - is to anticipate what is going to happen next. And bring in proportionate regulation that protects the consumer but which also does not make it impossible - and unprofitable to deal with the vast majority of UK plc. Having said that we also need to put our house in order to be taken seriously - and there are still far too many clients who I see who have patently not received a good service from their last IFA - and definitely their last Bancassurer. When the PFS merged with the LIA it should have stood up to be a proper professional organisation rather than a convenient way of income generation for the CII. End of rant!

Posted by: Simon Booth

Bend over and brace yourself

If you are an IFA the FOS have got it in for you. A recent experience leads me to believe that Parliament are encouraging the FOS to uphold complaints against IFAs in whatever manner they can. The FOS methods for calculating redress is antiquated and anti holistic financial planning, mocking the indepenednet financial advice process. With the introduction of TCF in its present format the FSA, FOS, and Parliament are giving us enogh rope to hang ourselves. Those who survive will get shafted - big time. In a recent complaint hearing the FOS clearly demonstrate their lack of understanding of the IFA process by looking at one investment wrapper in isolation i.e. because the wrappr wasn't split into at least quarters, non diversification was upheld against us. This decison was made completely ignoring the component parts of the whole portfolio. Therefore if you have written an ISA, a Unit Trust, an Investment Bond, a stakeholder pension, or any other variation of a pension on a standalone basis, thinking that a number of various providers constitutes diversification - think again. The FOS in their methods will not acknowledge it. Under TCF you must then notify your shortcomings or your GAP and seek to identify whatever may have applied to one client which would benefit another. Give this two years, and no PII will offer any terms because all clients with a single ISA provider in a single fund will fall foul of the FOS rulings for redress. Unless the IFA community stand tall,and take control of the situation the IFA will be the 21st Century Dodo. Don't stick your head in the sand with your arrse in the air - you know what will happen!

Posted by: Huw Roberts

low hanging fruit

Let's face it nothing has changed. When companies continually send communications urging clients to complain if they feel they have been mis-advised and the client decides to complain (mostly by fund performance) the adviser has to pay fees which are not recoverable even if the complaint is not up-held.

Posted by: Joanne Adrain

Bruised fruit, more likely

Commenter Tony, has simply missed the point. This is not about commission or fees, or even advice, it's about the FSA putting IFAs into the same charging category as product providers, which is what Keydate were, and stockbrokers, who have failed, and demanding that we pay for their clients losses. As I have said many times in the past, it is up to us to make our MPs aware of the situation and M J Winfield agrees. However, Huw Roberts is under a misapprehension if he thinks Parliament is in cahoots with the FOS. Parliament does not have a clue what is gouing on, so it is important that we let them know. But don't just write to your MP, canvas election candidates, as well, particularly if they are Conservatives, who will be looking for a stick to beat Labour with in the run up to the election. I might even try to get my local MP to raise a question in the House. Would anyone like to do the same?

Posted by: Mike Hillier

All the above expect Tony

I agree with. For Tony, what needs to be remembered with the Sttuctured product issue is that increainsgly it looks like the failure of Lehman's backed products was due to fraudulent misrepresentation on the part of directors at Lehmans (see the Time son Saturday I think it was), poor audditing by big name accountants and poor legal practice from relevant solicitors, all things beyond even national IFAs ability to dig in to, as the powers to investigate those issues are with regulators. With regard keydata, the £103 million disposed of again comes down to regulatory failures in Luxembourg and the UK including of supposed "custodian banks", while the Keydata ISA and HMRC debacle appears to have been known about for several years by regulators and HMRC with no comment or heads up given to either the trade body of IFAs (AIFA) or individual firms. The question has to be WHY was this not in the public domain, resolved sooner or a clear plan put in place for orderley transfer? Since your day Tony, most IFAs have moved away from the commission model I suspect you worked under and earn massivley less than you did I suspect too despite having to be more qualified. 3% commission will NOT influence the decision for any good adviser as the cost of advice will be broadly similar whatever course of action is reccomended includung NO product, so these were not reccomended for your implied large commissions. To be honest Tony, you should have known better yourself and I find it quite disgusting that you can be so disparaging of your former colleagues without offerring up in balance what sort of thinsg you used to sell and how much commission you used to take on products, my suspicion is a lot more....

Posted by: Phil Castle