Having spent nearly 24 hours somewhere in a field hotel in Hampshire, I am seriously worried about the complacency of IFAs. Indulged beyond measure, flattered by the fund managers that pay their bills seem oblivious to the conflicts of interests they court .
An accountant I spoke to over lunch discussed what could dent the complacency that was obvious everywhere I looked. Around one in ten of the guests were women, I don’t think I spoke to anyone under the age of 50, there was little diversity of nationality or race, this is a club and- from what I could see – an exclusive one.
The trick in selling to this club is to remind them- slide after powerpoint slide – of how wonderful the club is and how much value it brings to the 6% of the population it serves.
The most extraordinary example of this grievous sycophancy came in the form of research presented by Dimensional, I don’t have the digital slides so you’ll have to make do with photos.
Utterly bizarre! We pay advisers a wealth tax for ‘a sense of security and peace of mind!” pic.twitter.com/HCSv48244U
— Pension Plowman (@henryhtapper) October 15, 2019
It’s not just the advisers that need stroking, it’s the clients. These results are from the entire survey conducted by Dimensional but it’s possible to break down the clients of advisers between those who are fans (promotors) and those who are more sceptical (detractors).
Those who are sceptical about IFAs measure them by outcomes. The fans ignore outcomes and measure IFAs on soft factors pic.twitter.com/KHi70bXEsj
— Pension Plowman (@henryhtapper) October 15, 2019
One of the IFAs in the room thought being totally unaccountable for outcomes a good thing on the basis that “outcomes always disappointed”. In doing so , he neatly turned logic on its head so that the failure of the IFA to meet the client’s expectations became a failure of the client to expect the worst.
But who cares? IFAs have an endless stream of customers lining up to get some peace of mind from knowing what they’ve got, The cost of these financial placebos is a wealth tax equivalent to around 25% of the expected growth on a portfolio, which – since it’s taken out of the investment, means that the outcomes are under-performing of necessity.
Small wonder , those who don’t rate their IFAs are pointing to the state of their finances rather than their “financial wellness”.
And what needed to be said – and was said – was that the highest net promoter scores in financial scores have related to SJP.
A state of torpid complacency
I had thought that the PLSA (which I am visiting next) marked the extremity of self-indulgence but I’m now not so sure.
The ongoing love-fest between asset managers and their distributors – the IFAs – which went on pretty well 24/7 was quite perplexing. I really thought RDR , the retirement outcomes review, the asset management study, CP19/25 and all the other FCA remonstrances would have knocked some sense of pride and integrity into these jamborees, but this is not the case.
It is small wonder that IFAs are so smug and so arrogant on social media. They are fed lies by the packetful – lies are like their pork scratchings, they guzzle them without even noticing they’re being fattened up.
I do actually think that IFAs have overtaken the PLSA crowd for lassitude , indolence and myopia and that is saying something.
But tomorrow is another day and I have still to see the baying institutional hounds in Manchester.
More of this in a few hours time. Now for a read of Robin Powell’s dissection of Woodford, on the day when Link turned against him.
New from The Evidence-Based Investor: A landmark day for British fund management https://t.co/ySTyRc0WLr #Woodford #HargreavesLansdown
— Robin Powell (@RobinJPowell) October 15, 2019
And here’s a golden Oldie that reminds us how it all began!
Thanks for that Henry (NOT) and attack on all of us. I take it you didn’t enjoy the day.
I thoroughly enjoyed the day! The event was very well organised and I got a lot of insights.
I think you snookered yourself in this article a little.
90% of Woodford funds were bought directly by investors through platforms like Hargreaves Lansdowne or Interactive Investor. The majority of IFAs did not touch Woodford funds and for good reasons.
As a result, that ‘soft fact’ – ‘sense of security and piece of mind’ is realised by the clients by knowing they have good professionals on their side. All the research done so far indicate that the average self-investor, although he does not suffer the 0.5% to 1% per annum IFA charge, underperforms the average advised client. These are the type of comparisons you need to look at.
And if you can promote through the AgeWage or other disruptors solutions to improve self-investors investment performance, you are welcome. However, I have to tell the self-investor is a tough nut to crack. He/she likes to self-invest. He won’t admit he is harming himself/herself.
Henry, I can honestly say, hand on heart, that I have acquaintance with about 30 other IFA’s in the West Country, and, to my knowledge, none recommended Mr Woodford’s funds. Best have a chat with HL, methinks!
Utter rubbish, far from the usual thought provoking content that you create. If your message is that people shouldn’t seek financial advice when they are unsure what to do and ask for professional guidance, what is your suggestion? That they go the DIY route and pile into exactly the type of fund you are shaming?
IFAs (good ones at any rate) don’t just manage investments, they help create financial plans and cover a range of areas that you haven’t even considered. All this article does is further promotes mistrust in an industry that actually needs to promote and better articulate the benefits of receiving good quality advice.
I think what Henry may have been trying to say – or at least what I took from his article – is that the “I” in IFA stands for “independent” not “investment” – and the market needs to find a way of better understanding and resourcing a more diverse and less [financially] self assured client base than in the past. And be more transparent in doing so. If mistrust is there – and it is – then the financial services industry (not just IFAs) needs to be honest about why and not be overly sensitive to comments and criticisms otherwise matters will continue to polarise and it will be hard to make progress.
Julie, personally I am not oversensitive. It is just about describing the facts right. IFAs are not affected by this scandal, there are less than 10% of the units in Woodford funds which are owned by advised clients. The other are held by self-investors, people who think they know what they are doing! And there is approx. 20% held by pension schemes, the likes of Kent Local Authority etc
It is hard to measure the value added by an IFA, and many discussions could be had about the effect of our fees. But the best comparison is to be made between the average self-investor and advised client, after all fees are deducted.
When an author quotes a conversation relating to KPMG what more can be said. Henry, as I have observed of you before, you know nothing about the IFA fraternity and that is manifestly obvious.
As an IFA firm we removed Woodford from our portfolio service in 2018 for all of the right reasons as the fund conflicted with our investment process which has a clear structure. Meeting Woodford himself to discuss this did not help either.
This is so spot on. IFAs hoover up lies and fake news all the time and regurgitate them as fact. They are rooted in dogma. You can give a person information, but you can’t make them *think*.
IFAs live in a little bubble of self-righteousness and blinkered thinking.
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