Blog: Can you trust any third party?

Is it possible for an IFA business to completely trust a third party which may have values at odds with its own? David Ferguson, CEO of Nucleus Financial, doesn’t think so…

A topic I have been thinking about a lot recently is that regarding conflict of interest. This train of thought was sparked when I recently spoke at an Institute of Financial Planning (IFP) event.

I was fortunate enough to have been asked to lead a discussion on ethics and, amidst a load of other interesting stuff, one of the topics of conversation I enjoyed most was on this very subject.

Ever since Nucleus announced it was launching a platform business that would be majority-owned by the advisers that used it, people have occasionally queried whether our model could lead to a conflict of interest for advisers.

Might it be inappropriate for an IFA to use a platform in which he or she has a financial interest?

This subject was brought to the fore at the event by a woman who cited the potential for conflict of interest as the reason her firm did not consider Nucleus when selecting a platform. My response was to ask her how her firm could satisfy itself that a platform, over which her business has no control (and in reality probably has nil influence over), can be relied upon to provide the essential infrastructure on which the firm operates?

Indeed, how can any IFA business truly trust a third party which has values completely at odds with its own? Surely this is the key question.

Platforms are going to be at the core of the financial planning ecosystem like never before. And it is vital that advisers understand the ownership structure of the propositions on offer – knowing exactly who is involved and, more importantly, why.

I believe the right platform can give advisers an opportunity to align themselves with the interests of their clients.

But the only way an IFA business can be sure it can contribute to delivering in this way is to ensure it has as much control as possible over its key infrastructure. If advisers don’t own it I don’t really see how it’s possible to do that. Who can you trust more than yourself and others like you?

A legacy life company whose shareholders agenda is more about protecting the embedded value of the old business? A fund manager who is more interested in punting funds? I thought not!