I don’t know if there’s something in a name, but if I was an IFA, I’d be butting my head against anything called “Lewis” this morning.
There’s Martin Lewis, talking to us on the TV of taking control of our own finances.
There’s Paul Lewis, poking IFAs with a sharp stick, from his twitter bully pulpit.
Now there’s Sue Lewis, (Chair of the Financial Services Consumer panel) claiming
“The industry will not produce straightforward, easy to understand, value for money products because it does not make enough money out of them.”
It looks like “Lewis” is an “anti-IFA” super-brand!
IFA’s doing very nicely thank you.
I’d been thinking about IFAs anyway, ever since Per Andelius sent me a report in Money Marketing about IFAs living the high life. The reality is that most IFA’s in the UK are “ex IFA’s”. Numbers of regulated advisers plummeted post the implementation of the Retail Distribution Review in 2013.
Those advisers who climbed over the fence and have practicing since 2013 are a lot more canny , better qualified and – dare I say it – more respected!
They’ve managed to generate revenues not from commissions, but from funds under advice.
On average, restricted advisers say 70 per cent of their remuneration comes from percentage charges, with 24 per cent coming from fixed fees and 6 per cent from hourly charging.
You might say that drawing your revenues from a percentage charge on the funds you advise on is the same as taking commission but that would be like confusing “advice” with “guidance”.
As Paul Lewis points out, “advice” is a word that IFAs have a virtual trademark on.
Following criticism from advisers for using the term “advice” to describe a service that cannot give personalised recommendations, the Treasury has previously admitted “the name ‘Money Advice Service’ has always been misleading as MAS cannot provide regulated advice.” – (Justin Cash;Money Marketing)
Similarly, the Pension Advisory Service, Citizen’s Advice – even the “Money Saving Expert” Martin Lewis has had to register as a financial adviser!
Advice is a very expensive commodity. It is owned by Financial Advisers.
And IFAs are not going to let it be devalued by allowing the ABI to produce simpler products following the 2013 Sergeant review.
If you remember, Carol Sergeant, recommended the introduction of a “simple financial products badge for qualifying products via a robust accreditation process”.
But four years on and the ABI has allowed the simple product initiative to wither on the vine.
Enter Sue Lewis , intent on reminding people that
“Financial products are more complex. There is generally too much choice, rather than too little. Terms and conditions are lengthy and incomprehensible and many products have hidden fees and charges.”
I am sure that Paul and Martin would say three cheers to that. But that is not the end of the story. In a wonderfully written article in FT Adviser, Emma Hughes quotes Patrick Connolly , a financial planner at Chase de Vere
“People want more choice and more flexibility, but with that comes more complexity and a greater likelihood that they will make the wrong decisions.
“This opens up the need for advice, because the decisions people are taking are often too important to get wrong. This should be independent financial advice and could be facilitated through employers, which can make it accessible to more people.
“Unfortunately, we currently have a system with complicated products and ever-changing rules and regulations, where too many people are encouraged to make their own financial decisions. This sounds like a recipe for potential disaster.”
Patrick is right, it would be disastrous for financial advisers if we had simple products which we could buy without advice. It would be disastrous to have more products like the state pension , or occupational defined benefit pensions. It would be disastrous if we rolled back the pension freedoms and started offering simple products that paid a lifetime income to people.
We need complexity, we need lots of rules, we need financial advisers and we need them to maintain and grow their standard of living.
Otherwise things would be really awful. The last thing we want is people to take their own decisions – heaven forbid!
Want to read the articles first hand?
For the article talking about keeping “advice for advisers” read here.
For an article condemning the ABI for capitulating to advisers over “simpler products” read here
For an article showing how well IFAs are doing out of current complexity, read here