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!
It’s that grumpy Paul Lewis – moaning again!
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
https://www.ftadviser.com/protection/2017/02/16/abi-under-fire-for-pulling-plug-on-simpler-products/
For an article showing how well IFAs are doing out of current complexity, read here
Financial planning has very little to do with choosing specific products or specific funds. It is about helping clients understand how to plan for the future and how to protect against misfortune derailing a well made plan. It is about helping clients legally minimise the tax they pay. It is about coaching and mentoring clients to save and spend amounts which match their resources not their aspirations. It is about being a sounding board and a financial conscience. Whilst Paul and Martin Lewis do great work helping people understand cash products they do not help the man and woman in the street plan for the long term. There are good and bad financial advisers but there does seem to be an assumption that all of us are bad unless controlled and monitored. If we are looking at pay I suggest seeing what qualified actuaries earn on average and then think how their collective views on defined benefit pension scheme investment has f***Ed up pensions for future generations.
Agree everything above, except your last point.
Future generations don’t need DB pensions, just sensible planning for saving and/or spending wealth over the long term(s).
Subsequent points tend to focus on pension/retirement planning but workers primarily need advice on financial protection, which is often overlooked, particularly IP.
Employers might offer (access to / options for) such products as part of total reward but generally, people don’t know what they need to insure, or by how much… which is where the financial planner can add massive value.
A few push backs on your article.
The Pensions Advisory Service (formerly the Occupational Advisory Service) was set up in 1983, pre the advent of the term Independent Financial Advice.
Secondly, in 2015-2016 its budget was £6.4m and looked after 180,000 customers. There is no budget for a rebrand.
Finally, the comment from Patrick regarding “need for advice” is true for most people. For some people, the guidance on their retirement option by a qualified pension specialist is sufficient for the customer to make a decision.
As an industry, we spend huge amount of times pitching against each other; advice v. guidance, annuity v. drawdown, independent v. restricted. There is a role for all of us. The only way to build confidence in the long term savings market is for us all to work together. If we do not, customers will continue to have no faith in the financial services industry.
All very good points. I would add that the real need for advice or coaching or guidance is during working life. Usually most people make their own decisions not to save for the future and live for today. So by the time they get to retirement the average person has a tiny pot to last the rest of their lives. Bit late then isn’t it?
Absolutely agree. We need to get customers to take guidance and advice throughout their working life. It needs to become a social norm. Hence, we must stop the infighting in the industry.
NO!!! You may be right about the average person and their tiny pot but you’re wrong about them not needing advice. That’s exactly the situation when personalised ‘advice’ (nothing to do with products) can show them the effects on their incomes of using their pots in different ways, how tax will hit them differently with different choices and how to make sure that they’ve maximised their income form their benefits entitlement. In percentage terms on the bottom line, I’ll bet that’s the biggest effect of almost any ‘advice’ that can be given.
Gareth. I didn’t say they don’t need advice I said it’s a bit late. Which it is. If they have never received advice by then they aren’t suddenly going to have an epiphany. By then it’s just guidance not advice.
I think most people recognise ‘advice’ as a more useful term than the limited way in which IFAs want it to be used.
Gareth I agree with you but perhaps you are too fixated on your desire to help small pot pensioners to realise I agree with you? However the bigger point is advice or guidance would be far more useful thirty years BEFORE they get to retirement. Then they would have far better choices and options.
Brian, I don’t disagree that better decisions 30 years before retirement could help many people. What people in the, largely, extremely prosperous financial services industry don’t realise is that there are people who just can’t make use of good advice then. If you are faced with a choice between putting food on the table for your family or heating the home then adding pension contributions to the mix isn’t much use. That situation is getting worse again now after some improvements in the 90s and 0s. Getting advice – and I mean advice not ‘regulated advice about products’ – on how to make best use of what your resources are, when you do retire, is often the difference between food-or-heating or food-and-heating not car vs cruise vs conservatory.
Financial products ae complicated, life is complicated a lot of industries are complicated when you do not know them, I could look up online how to lay the pipework to fit a new bathroom it doesn’t mean I am going to I have no experience, so people with no experience would do it, and are they going to do as good a job as a plumber who does it day in day out and is properly trained? If you make a mistake you could end up with a house flooded, huge bills, potentially uninsurable and a lot of unsettlement whilst it is fixed. If you make a mistake with your finances then there may never be a fix a mistake could cost you your lifestyle or your standad of living for the rest of your life and whilst that may seem dramatic, it can and does happen.
As financial planners, we work in a highly regulated and accountable industry, there is the FSCS and FCA for the rare cases when things do not go right. Aside from that we are all highly qualified both in terms of initial exams and ongoing CPD.
Some people will never want to pay for advice and realistically they are not clients that we want for out businesses. We want clients that appreciate the complexities and the benefits of having full financial advice, we want to be able to help them understand and improve their situation, ensure that they can cope financially whatever happens. A lot of people do appreciate that and we can all build up great relationships with these people and it is rewarding to help them.
Obviously as a financial planner I am biased but I think that comments from the Lewis’s are dangerous.
Donald Trump would probably point out that journalists like Paul Lewis spread fake news and I would agree. I’ve never understood why these journalists feel they serve the public best by undermining the professionals with their alarmist and quite shameful comments. It’s the government that makes things complicated, not advisers. As long as successive governments keep changing things and meddling, especially with pensions, people will need professional, qualified advice. If you ran the complaints dept at the FCA you might be forgiven for thinking everyone is complaining because complaints is all you see and they occupy your entire day. In reality only a minuscule proportion of transactions are based on flawed advice (where any advice was given).
We don’t hear journalists telling us to avoid doctors and pharmacists and to buy direct from the drug manufacturers and if they did it would be highly suspect. Fortunately anyone who is the client of a professional financial adviser/financial planner will know just how valuable that relationship is and they are unlikely to be swayed by the unqualified rantings of journalists.
Financial advisers have a long way to go to be considered as doctors or pharmacists. I suspect the weight loss industry is a closer analogy in many people’s minds. The lewis brigade give the rather general advice of eat less/better and exercise more. Financial advisers try to sell a diet plan or weight loss pill.
Nah. #
If an IFA “sells” the wrong product, they’ll come a cropper – and rightly so.
Generally, IFAs don’t really sell a product, they sell *advice* – which may lead to a product. Or may lead to no new product at all -if what a client has is suitable, it stays.
I can’t think of any other industry in which you face a LIFELONG liability for what you tell your clients. Paul Lewis et al don’t.
In my experience all roads lead to wealth management!
Protectionism at play in the money management industry!?
Who’d a thunk it?
Lewis’s…. so what?
I serve a small client base…….