From: The IFA Defence Union
Sent: 20 May 2005 09:33
Subject: FT are doing an article on depolarisation - input from IFAs required
Rebecca Knight is a Personal Finance Reporter at the Financial Times, she is covering depolarisation '6 months on' and asked me for input after I questioned the sanity of Dan Waters at the FSA back in February. The same Dan Waters who was on the front page of FT Adviser in the story about FOUR firms signing up for 'basic advice'..
They are not of this planet are they? This Government passes down madcap policy to the FSA for implementation and the industry foots the bill for the wasted time and effort, look at 'consumer' education, look at Sandler products etc.
So, what are your thoughts on depolarisation?
Rebecca seemed to think banks would be compelled to offer more choice despite recent reports showing some big names are not interested. What makes people think the FSA are trying to impose the regime on the industry and might even succeeed in doing so?
Why would an IFA become 'multitied' or even set up another company that is multitied, is it commission?
An IFA can offer whole of market choice for the Open Market Option, the multities I have seen to date involve just ONE annuity provider such as the Pru, what is the point of that? Why would an IFA throw away the ability to offer the BEST annuity on the market?
An IFA can offer ALL life policies including Whole Of Life and convertible term assurance, the multities announced thus far have one company for the protection policies, what happens when the adviser sells term assurance when WOL might be more appropriate. more to the point WHO is ultimately responsible for the compliance when five companies are tied to same person? This was the problem in Australia, the companies eventually walked away from multities and went for 'wraps'.
What are accountants and solicitors going to do with their referrals when the IFA is extinct? How can they justify referrals to multitied agents?
Why don't the FSA depolarise by saying EVERYONE should offer Whole Of Market and become one of David Severn's 'WOMBLIES'? We all know why, the banks have always failed to provide quality advice because they are not professional advisers and because targets rule their very existence, look at that case where a couple earning £5,000 pa were given £100,000 in loans over a 12 month period!
Your thoughts on a postcard please...
You can email her directly at Rebecca.Knight@FT.com but please copy me in so I can put it on the web, if you want to be famous that is!
p.s. For the record, I don't believe for one moment that IFAs will go the way of the Dodo... But I do believe the FSA as we know it will not last much longer.
From: Alan Lakey
Sent: 20 May 2005 12:46
42 London Road, Apsley,
Herts. HP3 9SB
Fax: 01442 233631
Tel: 01442 234800
Money Management Equity Release Planner of the Year 2004
I understand you are writing re the advantages, iniquities of de-polarisation.
As a practicing IFA since January 1986 it has always been a self-evident truth that only whole of market advice can possibly offer the cheapest, best, most flexible, fastest growing or whatever other requirement the client has.
I have no basic objection to the existence of tied agents – in fact, their very existence makes life easier for me in confirming value for money to clients. The existence of multi-ties is a different matter. This purposely muddies the waters and allows the multi-tier to pronounce that they have selected the best items on the market in the interest of their clients. This is codswallop – the choice of company is usually down to the maximum commission uplift available and also assistance with funding expansion plans. None of this is in the interests of the client.
I have been approached by St James Place whose clever approach involves promises of practice buy-outs allowing a snug retirement, multi-ties with the ‘best’ companies and groovy junkets in Thailand. At no point in the discussions were my clients mentioned!
I cannot possibly see how any regulator worth its name (let’s not forget that they supposedly have the interests of the consumer as a priority) can sanction such confusion with the obvious end result that the bancassurers and multi-tied national brokers grow fat at the expense of offering whole of market advice.
No doubt weasel words will be used to explain how we all benefit but, so what, Robert Maxwell spoke reasonably as well.
Authorised and regulated by the Financial Services Authority
A R Lakey B A Davison
From: Tony Menghini
Sent: 20 May 2005 11:58
To: 'The IFA Defence Union'
Subject: RE: FT are doing an article on depolarisation - input from IFAs required
My thoughts entirely. The mandarins up in FSA towers are not living in the real world! We are updating our disclosure documents, agreements/IDD's and really believe that clients will not be bothered to shop around as the thought of facing another interview will deter most of the public. Also the public is against paying fees generally. Witness the problems accountants have trying to get money out of their clients for work done. Many have huge cash flow problems.
Keep up the good work.
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From: Dave King
Sent: 20 May 2005 11:44
Cc: The IFA Defence Union
I’ve been given your name as a potential polarisation peculiarities pursuer, so here goes, and forgive me if you’ve heard this one already…….
My firm , A.S.K. has 3 partners.Let’s imagine that partner A ties to 4 companies for life and protection business. Partner S ties to 4 companies for pension and investment business and partner K ties himself to the bed- no sorry, remains an I.F.A. (maybe by setting up 3 different companies?)
First consultation is free with partner K, who discovers the best in the market for the client for one of the recommended products happens to be on the multi tie panel of partner A- so tells the client that partner A (or new company A) will actually deal with him. If the best in the market for other products isn’t on any of the multi tied panels then he deals with it himself.- Whether by retaining commission or charging a fee.
Why do this?- Because the FSA/Govt has decided that multi ties are a good thing to have available!?- No, because if there is a method of extracting the most commission
available from a certain situation, then why should the single tie/multi tie banks be the only ones allowed to do so?
Thankfully, most of my business comes from referrals and existing clients, but when I come across those clients who have had “advice” from an estate agent or a bank, then invariably this advice has been wrong, since the “adviser” in question has a target to meet or is out the door. This “advice” usually consists of wrongly sold mortgage payment protection insurance ( MPPI -when income protection would be better)- but the “adviser” doesn’t have that option in his limited product range and is on a better bonus if MPPI is sold. It also usually includes loan protection as a lump sum added to the loan- when a £5000 loan suddenly becomes £7000 – and just you try and claim on it! There’s probably also a useless ISA invested in a fund utterly unknown to the client.- But they’ll all be in a nice coloured folder bearing the banks internationally known logo and the client felt all nice and warm, until either he tried to claim, or tried to cash something in ,or worst of all years later had a heart attack because his Isa is worth zilch. –Aha- does he have a letter from the bank/estate agent stating that although he was advised to effect Critical Illness cover he declined. Is there a copy of this letter signed by the client and on his file? If not, he can sue, because the nanny state says so! –
Dare I try and change some of these plans- I have to give blood to the compliance people for it! However, when it happens to an ex client of mine when I know it’s wrong advice being given, I am powerless.
This is the laughable, litigious, ludicrous, position we face- because the FSA/Govt think that clients should have “more choice”.
What they will get is less choice since the providers of policies will only be able to pay large commissions to the large multi tie “agents” left on the playing field when we, the IFA, have been killed off. And don’t give me the rubbish that the man/woman in the street will pay for advice such as above. That I’m afraid, is reserved for the upper class, middle England , higher rate tax investor- who the FSA base all their figures on.
Last rant coming up then I’m off home to bed with the flu, and if I crash the car into a bank on the way, I’d like the money in used 10’s please.
Do Banks/building societies/estate agents ever conduct an initial interview going through Terms of business, initial disclosure and dare I mention Menu?
That’s 2 signatures before you start. Fact find- another signature, Mortgage fact find- another. MPPI declinature-another. Authorisation to obtain details on existing plan(s)- another 2/3 signatures. Apparently I would be led to believe that a bank would spend time doing this! I don’t think so- but do you know how they get away with it?
One sentence in a letter somewhere which simply states- this advice is on a limited basis. If we, the small IFA tried to use that defence 2/3 years down the line, we’d be crucified- but the bank/estate agent would just swallow the £200,000 fine. This is called business logistics, when it’s cheaper to pay the fine than to rectify the problem. Why should they hazard millions of pounds of income stream, just so that clients are given the correct information, or advice?
If I should die think only this of me…. There is some corner of a foreign field that is forever independent………….Freedom, as William Wallace says.
Dave King A.S.K. Independent Consultants LLP 568 Clarkston Road Glasgow G44 3RT
Sent: 20 May 2005 11:16
Subject: Re: FT are doing an article on depolarisation - input from IFAs required
I will leave it to you to decide whether you copy Angela Knight into this e-mail.
Polarisation again raises the link with the OFT - where the key to Equitable, endowment and pension shortfalls lies. It is also why Adair Turner is already screwing up the future for pensions.
Polarisation first passed the OFT scrutiny and then subsequently failed the OFT scrutiny at a later stage.
I don't think Angela wants her article to dig that deep - she is I would guess looking for a lighter angle.
- but she will know the OFT recently completed their review of the FSMA (in part using consultants - Oxera).
If she wants to know what both the OFT and Oxera missed - again - she can contact me.
It goes to the heart of the matter - with polarisation as only one item on the agenda.
From: Steve Pett
Sent: 20 May 2005 13:44
Evan Owen thought you might be interesting in my views on depolarisation.
Anyone who wishes to operate as a multi tied agent is EITHER:
1) Interested ONLY in gaining the highest commission levels, never mind the clients interests or the quality of the products OR
2) They are tied agents who wish to be able to HOODWINK the public into thinking they are as good as IFAs.
There is absolutely NO WAY a multi tie can be an honourable alternative to being an IFA. They might pick the 10 best companies today, but that 10 will be different in 1 year, very different in 5 years and probably have only one company left offering top rate products at the end of 10 years. But the multi tied agent MUST go on flogging the rubbish, or they will lose all the income they have built up with any company they chose to ditch, and face massive financial penalties.
The FSA inherited a sensible regime where you are either tied to one company, or independent. I have no problem with allowing white-labelled gap-filling as this will encourage the establishment of new product providers, to replace those wiped out by over regulation, but multi ties are nothing more less than a fraud perpetrated on the public by people who continue to have no comprehension of the enormous damage they are doing to UK Financial Services at home and to its reputation (and hence earning power) abroad.
It is well know within the industry that those in charge of it are either congenitally insane, or they are civil servants with no understanding of a once proud industry (which has already lost over 75% of its advisers) or they actually do want to wipe out the industry for some strange reason.
Perhaps you can tell us, because every adviser I talk to is very confused as to why the FSA want IFAs to refuse advice to all but the very rich (and I don't mean common or garden millionaires). I used to love helping ordinary people, but came to the conclusion I could not do this and earn enough
for my family to live on. Advisers are leaving the
industry in droves, just when MORE advice is needed, and those who are left are ditching ordinary clients because the cost of the red tape exceed the income they can generate by a very wide margin.
Hope that helps!!
www.IFAbonus.co.uk 0845 129 8858
Gave up the struggle as an IFA in November last year, and still grieving!
From: Ned Naylor
Sent: 20 May 2005 12:39
Cc: Evan Owen
From the point of view of customer choice, best advice, best execution and product research the only feasible method of delivering financial products to the consumer, which "do exactly what it says on the tin"
is the Independent channel
All the FSA has done with this exercise is complicate matters for joe public, who in the main trust banks and building societies even though the majority of the recent so called mis selling and other financial scandals seem to eminate from that sector.
It should be illegal to offer financial advice on anything other than a whole of market selection process.
It is quite clear as well, that if this did happen, the number of financial products on the market which fail to stack up to their exaggerated claims, would reduce to those proven and reliable products and companies that have stood the test of time, without having to be oversold by over zealous commission hungry salespersons whose only interest in the client is how much they can make and how quickly it could be done.
The requirements for such an august body as the FSA would by that very act, be reduced by over 80% in my estimate and the costs similarly downgraded, giving a more efficient financial market place over all.
This would not stifle innovation, it would simply put the onus back on the financial providers to provide.
What do you think ?
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