FSA: IFAs most popular and trusted source of advice

I wonder how much that Report/Research cost to produce?

I am looking forward to the cost of the extra levy, followed by their announcement that detailed research had concluded that a fool and his money are easily parted and the Regulator is close to identifying the colour of a Red Bus.

And how could the 61% be confident the advice given was "appropriate" (surely that should be suitable)??

How would they know, unless they are IFA's themselves...info assymetry and all that!

I wonder if we may take this research to counter the arguments of those who think that consumers don't value independence and that being independent won't matter any more??

P.S. It's ok - I will actually read the whole report to make sure that the conclusions and reports of conclusions are fair and reasonable and I'm not just jumping on a bandwagon!!

MiB - having a bad day?? Your comment is unusually ascerbic ;-)

Am I missing something here? Isn't this good news?!

The comments section on this website is worse than reading the daily mail! Come on, this is positive news, maybe the millions of 'the FSA are trying to dessimate the IFA industry' commentators can now look at this and see progression?

And then FSA try to screw us for their own and other people's errors when things go wrong!!!! It gets ever more entertaining!!

One hesitates to say the report is stating the obvious however whilst I will read it, with the FSA only having 11 months remaining life expectancy what actually was its point?

Gillian, nice to hear from someone who represents the IFA population. The silence is deafening from the other lot that call themselves IFA representatives but actually represent 'restricted' as well.

Barman, its Decimate , mate

To understand the value of this research you need to see the questions asked and if it was tick box type answers. 61% Considered that it was 'appropriate' is a fairly low score overall, however as someone else has stated without going to a number of advisors how are they to know it was appropriate.

If they didn't act on the advice was that counted as inappropriate?

Me thinks research for research sake and any advisor who deals in the real world working on referral business knows the value of advice as they live or die by it!

FSA behind the curve on this ? Given the FoS only deal with 2% of complaints from IFAs suggests these numbers should be much higher. Still mustn't grumble after nearly 24 years of regulation IFAs are winning the argument. Just as well because there is unlikely to be any other (significant) source of advice left post RDR!.For so long the consumer has had access to affordable advice and yet as it is finally being recognised it is about to be withdrawn. Ironic is it not?

Pat Riot - maybe it was dessicate :-)

What?!!!!! Are you seriously telling me that ‘research’ had to be undertaken to establish this already well-known (to everybody BUT the FSA) fact? They only need look at the complaint statistics and the structure of a bank adviser’s pay for heaven’s sake.

This is not rocket science, although this amazing discovery does seem vindicated when today we also learned that there has been a spike in bank staff stealing from customers.

However, let’s not get too excited, because no doubt IFAs will be well rewarded by this ‘amazing discovery’ by an equally amazing hike in FSA levies.

@Gill

Yes. Good Point re value of independence.

@Nick

Yes - it's good news to a degree. Yes, its much better than the days of "Dear Banks, we look forward to giving you the retail market to sort out".

But when was the last time you saw the Bar Council or the SRA or the FRC spend a lot of money to conclude that "people trust Barristers/Solicitors/accountants"?

The underlying point here is that we have an expensive, distant regulator who has little inherent understanding as to the subtleties of the market place.

(Likewise, I note they also seem to have done a large block of work on how there's something wrong with the Sale & Rentback Market)

Yes Gill - I'm having a bad day. Sorry if I sound a misery guts.

One does to take into account that only 17% sought advice last year so one needs to know what the 83% who didn't seek advice think about independence v restricted.

Yes it's possible to extrapolate to a degree, but not to the degree required.

What I do think is good news is that the FSA are happy to allow the impression that IFAs are the favoured means of providing advice,which rather debunks this hystercal myth oft repeated that the FSA's secret desire is to get rid of IFAs.

Ian Coley

Partner

Medical Investment Services

@Ian Coley Feb 03, 2012 at 14:40:

You say: This debunks this hystercal myth oft repeated that the FSA's secret desire is to get rid of IFAs.

I say I am not paranoid enough to believe that the FSA has a hidden agenda to do away with small IFAs, but the law of unitended consequences may well mean that this will be the result of their actions - so who cares about the motive - its the end result that matters.

So the FSA now say IFAs are consumers' most popular and trusted source of financial advice! In answer it is the same FSA that has ensured dwindling IFA numbers in the lead up to the implementation of the RDR. Hector is quite happy to see 25% of IFAs go! The FSA is about to kill off independent financial advice in the UK for all but the wealthy and perhaps readers of Citywire!

This is a benchmark survey which is repeated annually or thereabouts with reports going back at least 6 years and probably to the formation of the FSA. Its value is therefore in tracking what changes over time.

It also covers much more than the IFA question - the primary purpose of the survey is traking awareness of and confidence in the financial system as a whole - which includes the vast majority of people whose only engagement with financial services is their bank account.

There's interesting stuff too about what consumers assume about financial protection, institutions going bankrupt, what consumers understand about investment risk ...

Yes, I have just read the whole report and yes the figures are consistently high for IFAs - 91% of consumers seeing an IFA are very or fairly confident they had received appropriate advice - it's 88% being very or fairly confident at banks / building societies - but only 33% are very confident in their bank advice.

This is hugely supportive of the IFA community and I will be saving the link for future reference ;-)

"The reason for the difference could be due to the nature of the relationship"

"could"?

The reason "could" be many things including professionalism, the fact that the IFA is the agent of the client rather than the bank. But until proper reasearch is carried out the FSA will continue to assume rather a lot.

BTW, in my role as agony aunt for IFAs it appears that they are still being hounded following a visit from the FSA for not having every box ticked, it doesn't matter that there are no complaints, it is all about 'systems and controls', well the banks never had a visit and they had ALL the systems and controls in creation yet look at the £billions in consumer detriment!!

Society is in dire need of regulatory balance, I see none. Well not from where I sit at any rate.

@Ian " What I do think is good news is that the FSA are happy to allow the impression that IFAs are the favoured means of providing advice,which rather debunks this hystercal myth oft repeated that the FSA's secret desire is to get rid of IFAs".

Not necessarily Ian. It just means they have to try harder!

I'm a bit late coming to this blog, MIB having beaten me to posting my first thoughts. That aside, was it really necessary for the FSA to have spent however many tens of thousands of pounds of our money that this survey cost to establish what everybody already knows? All the data, the vast majority of media coverage (I can't lay claim to having seen or heard it all), all the consumer feedback via other channels and almost all the anecdotal evidence already tells us that IFA's are the best, most trusted and most respected source of advice.

Also, the banks and building societies don't give advice. They shift product. You've got £XXX to invest, your ATR is YYY, so what you need is one of these. That's not advice ~ it's just flogging stuff.

And if, yet again, this survey shows IFA's to be the best sector of the entire FS industry, why is the FSA intent on turning up the heat ever further and resisting calls from the TSC to give us a bit of respite from its relentless campaign of persecution?

mmm, beware man bearing gifts!!

@ No Bull - Maybe those of us who are volunteer workers for the IFA community through AIFA just have more constructive things to do?

Finally, l'ifa passeport en provenance de France says what I had been waiting for... Basically, what news/story/charge/levy/other is being hidden behind the statement that IFAs are more trusted than Bankers, when it comes to advice!!!

@ Neil Liversidge

don't you mean the IFA and the 'Restricted advice' community!

Personally, I prefer that 'Money Advice Service' off the telly...and it's free!!!

I have seen the results of a secret survey carried out by the FSA. It's overwelming conclusion is that 89% of IFA's do seem to have a very high opinion of themselves,...

We as a business spent £90,000 of our own money using ind researchers ,interviewed face to face 18,000 people in the UK ,asking about satisfaction levels among consumers when buying fin products.

We also measured what they thought they were paying , and compared results between Banks , Tied Agents , and IFA's . The results as you would expect showed Banks in particular in a bad light , especially as over 60pc of their customers didn't know what charges they'd paid .

The research was offered TWICE to the FSA , and the ABI ------neither was interested ! Maybe the stats were too embarrassing for the powers that be , and you wonder if they collude. And what's going on .

Publish the research Alan, that what they do.

The FSA do not like dealing with IFAs because we know more than their staff do and they don't like to be shown to be incompetent and ill informed when dealing with us. Getting rid of IFAs by pricing their services out of the market place is the only way they can see to ridding themselves of a problematic, awkward, better informed, more respected, better equipped competitors to the lamentably inept banks and regulatory bodies we have suffered since the closing down of Fimbra.

The Retail Distribution Review is designed to ensure the "high end" financial planning will only be able to be afforded by better off clients, leaving the masses to suffer the slings and arrows of outrageous banking services.

How did this wonderful industry, the engine of economic growth in bringing money into the equity markets, ever end up in such a mess?

The FSA could never accept any form of Independent research as it will inevitably conflict with their own inept and unsupported "evidence"

Consumer detriment will increase and those who caused it will be protected.

I suppose in the end, those of us who just get on with it, will adapt, change our modus operandii and go forward.

Ned

You really believe that do you? Your really believe the FSA wants to bring about the demise of IFAs?

I reckon that IFAs have some responsibility for the current malaise and it is up to IFAs in part to battle for better regulation to improve the FSA/ FCA tothe standard we expect.

Ian Coley

Partner

Medical Investment Services

Ian

@Ian Coley

@ Ned

Perhaps it would be better to reverse your question to Ned and ask if you can honestly conclude any thing other than that the FSA wants to destroy independent advice in the UK? Surely you have been watching this debate unfold and will now have noticed that its not just IFA’s shouting?

Martin Lewis Money Saving Expert June 2009:

"There's a worrying possibility that the FSA is about to kill off independent financial advice in the UK for all but the wealthy. I do hope I'm wrong."

Janet Walford OBE, Editor Money Management Sept 2009:

"I am not paranoid enough to believe that the FSA has a hidden agenda to do away with small IFAs, but the law of unitended consequences may well mean that this will be the result."

Robert Kerr, head of retail distribution development at Scottish Widows says:

The RDR could have the unintended consequence of "disenfranchising" the majority of consumers from financial advice."

Nick Cann chief executive of IFP 30/09/10 said:

“The FSA must develop a “catastrophe strategy” in case it reaches June 2012 and half of advisers are not yet meeting the RDR requirements.”

etc etc etc

Simon

And that's your supporting evidence is it?

A quote by Martyn Lewis from June 2009? You're kidding right?

plus

Janet Walford stating that she doesn't think the FSA is trying to kill off IFAs - from Sept 2009

Robert Kerr in 2010 talking of unintended consequences

and

Nick Cann not saying anything at all.

Just where does any of this support the contention that he FSA is trying to kill off IFAs?

I think my question stands.

I would agree with Janet Walford and Robert Kerr regarding the unintended consequences but that's not the same thing by any stretch of a most fertile imagination.

Personally I think a cull of the IFA market will be a good thing and lead to a better standard.

Ian Coley

Partner

Medical Investment Services

Which is why, when the one organisation tasked with representing IFAs decides it's going to represent "professional financial advisers", it's time for IFA Centre - representing and supporting Independent advisers, exclusively.

Some of this is about getting your voice heard, but some of it is also about ensuring that Independent advisers who want to stay Independent have the support you need to do so.

Anyway, for Independent advice to be destroyed, IFAs will have to capitulate - I'm willing and able to fight to protect Independents and Independence - you can join IFA Centre and make sure your voice continues to be heard, or roll over - your choice.

To Ian Coley ~ Any suggestion that there's any shortgage of evidence the FSA has no prejudicial agenda against IFA's (hidden or otherwise) is a bit like standing in the middle of a howling blizzard and saying what a nice warm sunny day it is.

@Ian Coley

It matter not that the consequences are intended or unintended if the end result is the same.

The FSA is not an individual personality with a conscious desire to destroy independent advice any more than a cancer desires the destruction of its victim – however the result of both actions is the terminal decline of the victim.

You say that the loss of many of your competitors would be a good thing and perhaps in some cases you may be right – however in many other cases you are wrong! If the FSA had a mandate for their RDR then who could criticise? However, the fact remains that the FSA do not have such a mandate.

The FSA is an unelected, unaccountable body of the executive and the executive FSA is not supposed to make laws (the role of the legislature) or interpret them (the role of the judiciary). The role of the executive is to enforce the law as written by the legislature and for its actions to be adjudicated upon by the judicial system.

We all know this is not the case in financial services (maybe you know otherwise). The FSA is therefore an abuse of power in a democratic system and as such a danger to us all and yes even you and your business model.

So intended or unintended the end result is the same.

Sory ~ I meant to write has A prejudicial agenda...

Good news that FSA have admitted publically that consumers value IFAs, even if we did already know that! It will become increasingly difficult to find consumers with an IFA in the future! or will it?

YOu might think iFAs are being paranoid when they feel their livelihoods are threatened, in the employed world, if an employer tried such tactics, they would be up before a tribunal for unfair dismissal and worse, age discrimination.

How can any organisation justify putting someon out of a job they have been doing quite satisfactorily for 20+ years if they do not achieve a new higher level of qualifications by a certain date. It's lunacy. It is also extremely unfair treatment of a sector of the industry that has served the public better than any other.

I don't necessarily disagree with IFAs becoming better qualified, the time scales and the cliff edge mentality bothers me somewhat, even though one blogger suggested we had 4 yrs to get to this next level, a lot of the qualifications that may have put us at that level were discounted. Who cares about G60 anymore?

The real timescales were reduced to less than 2 yrs once the final set of exams was confirmed.

The sense I get from these blogs is that the FSA has arbitrarily, without taking any notice of IFAs, also decided that commission is detrimental to consumers and that any IFA whose qualifications obtained many years ago, is no longer fit for purpose, yet the major portion of investment and other complaints still lie outside the IFA sector.

If someone can explain to me why a commission applied as a percentage of funds under management (say 3% ) which forms part of a plans overall charging structure is different from a fee of 3% applied on the funds invested and front loaded is any different as an outcome for the consumer, all it means is that instead of spreading the cost of advice over a longer term, the client pays up front.

So post 2012, consumers of all types will either have to put up or shut up and not get or be able to fund advice via a commission system and that's that, Job Done, close down or render useless hundreds of smaller IFA practices and make those who stay pay more regulatory fees.

The costs of implementing the RDR are to most peoples minds astronomical, these people spend our fee income with no consideration of the effort and hard work that is needed to generate the income to support the fee structure.

I lost count of how many changes to the rule books post Fimbra have been put together, none of which can hold a candle to the Fimbra rulebook, which was clear, transparent, not open to ambiguity and understandable.

There may not be a conspiracy to get rid or reduce the IFA sector, maybe we are all being paranoid, but it doesn't mean THEY aren't out to get us!!

As for joining an association of any sort as a group, we are not listened to. EVER!

Even the TSC could not divert these numpties from throwing us all off a cliff to see who can fly.

Ned i think what statred out as an academic response to the ills of misselling- the banning of commission, has evolved into a utopian wish list that has had all manner of unintended consequences , not least for the consumer.. While RDR will be favourable to wealth managers and their clients the majority of consumers will end up 'DIYing' to some degree. Partly because of cost and partly through reduced access to advice. There will be no second chance as most IFAs who leave at the end of the year will find alternative employment. I can see the legal and accountancy professions adding modules to their exams to train up the IFAs of the future. If past experience is anything to go by both professions will wrap their advice up in so many caveats and risk warnings the client wont know what the actual advice really was.

To Ned:-

1. It isn't paranoia when they're really out to get you.

2. The FSA isn't "any organisation". It's a law unto its own self and doesn't have to account to anybody or anything. Ask Andrew Tyrie.

3. I agree with you on the subject of qualifications, even though the amount of stuff that has to be learned, despite having no apparent bearing on anything we actually do, is a decided PITA. But, for experienced advisers with clean regulatory track records, stable client banks and expecially those who subscribe to compliiance support services ~ why not allow grandfathering with, perhaps, a slightly more demanding schedule of CPD?

4. Commission, for the most part, will simply be exchanged for (deductible) CAR so, for the likes of you and me, should pose no problems. The banks, on the other hand, are going to find CAR very difficult. Their customers (if they've any sense) simply won't sign a piece of paper agreeing to 8% CAR.

5. Costs of the RDR? Nobody at the FSA gives a toss what you or I or anyone else thinks. The initial Cost:Benefit Analysis was a criminally distorted sham ~ £600m initially and now set to break the £2Bn barrier. Stop the RDR and go back to Old Kent Road? On yer fiddling bike mate, we've invested in the RDR far too much (of your) money, intellectual capital (mostly speculative, but never mind) and our reputations (which are in a pretty tattered state anyway) to turn back now. So it's peddle to the metal with the RDR juggernaut and to hell with the naysayers. And guess who the wild-eyed, sweaty maniac at the wheel is?

But what do we know? We're just the errant Great Unwashed out here who only half know what we're doing and who, at every opportunity, will rip off the client for maximum commission with minimum care and effort. It's from people like us that the FSA was created to protect the Great British Public ~ talking of which...............

Benefits? ~ not really quantifiable ~ it's all just a huge institutional hunch that may or may not work out.

Simon

Of course, I realise that unitended consequnces may lead to the same conclusion but actually it is very important to recognise that thee is a world of difference.

My view is that trying to deal with the FSA is going to be far more difficult adopting an approach based on paranoia rather than one which simply sees that some of the proposals and actions will cause effects unintended.

Who do yu think the FSA are gping to deal with more credibly?

Mr "You are trying to destroy me" or

Mr "There may be a better way of dealing with this"

As far as seeing any of my competition being culled, that is not, with respect my point.

I am not keen to see good advisers leaving the industry. I am however looking forward to a more adequate system of regulation which leads to an increased difficulty for incompetents and unprincipled advisers having little option but to improve or quit..

My sole desire in any of this is a stronger, more professional, more capable, ,more principled market regulated properly with the right focus by a more capable, accountable regulator.

I think we'll find it difficult to hold anyone's ear if we collapse in a heap of paranoid hysteria.

Ian Coley

Partner

Medical Investment Services

Ian

I had the same misty eyed view in 1987, 1989, 1995, 2000 and other times when the regulators said they were getting tough, changing this and that.

If you belive that the RDR will remove incompetent and unprincipled advisers you will be bitterly disappointed.

@Ian and Evan

I agree with Evan. RDR has nothing to do with the removal of incompetent and unprincipled advisers.

You seem to assume so called professionals don’t get complaints?

Prospective solicitors must first possess a qualifying law degree, or if they have a non law degree but one which is a "qualifying degree" have then in addition completed a conversion course. Then all prospective solicitors must enroll with the Law Society as a student member and take a one-year course called the Legal Practice Course and then usually undertake two years' apprenticeship, known as a training contract, , This training contract was formerly an articled clerkship. So a six years of training and exams!

The Legal Complaints Service (LCS) investigates complaints about solicitors handling over 300 complaints a day. The Solicitors Disciplinary Tribunal’s (SDT - a division of the High Court) Annual Report to April 2007 revealed that up to 17,000 Solicitors per years were reported to the Law Society for action.

When you bear in mind that the LCS can only look at a case against a solicitor within 6 months of the act being complained of and they can only investigate maladministration and fee disputes that’s a pretty high figure for a ‘fee-based expert’, especially when you realise that the IFA is subjected to an unappealable, compulsory, summary jurisdiction making awards as great as £150,000 and all with no protection from the Statute of Limitations and no 15 years long stop.

Six years of exams and a very restricted complaint definition didn’t stem complaints against solicitors and RDR will do nothing for our industry!

Even Walter Merricks former Chief Ombudsman said:

"I think it would be unwise to count on the assumption that complaints from the retail investment world are suddenly going to go down as a result (of the RDR)"

Such naivety

@Evan : don't denigrate your efforts by perjoratively describing them as "misty eyed". Some battles take a long time - and some battles would never have been won if they hadn't been fought for many decades. There's battles that are won, battles that are lost and battles that are surrendered. There's different ways of fighting battles - whatever way you want to look at it, Independence is worth fighting for and I'm not giving up yet.

Gill

I only deal with facts these days and although the only advice the public deserve is whole of market the fact is that someone somewhere has set the regulator on this course, whether it is down to pressure from the PFS or the ABI or the banks the fact is that the needs of the consumer have played second fiddle to the creation of more rules and regulations.

These rules and regulations are no substitute for effective supervision. Fact.

@ Simon Mansell, your comparison between the legal profession and that of the IFA when it comes to complaints are worlds apart. An IFA does not represent a client in a win or lose scenario and therefore the result of poor advice is less likely to attract a complaint (as we all know investments may rise as well as fall) than a legal representative that lost the case... Just pointing out what may seem blatantly obvious.

You also think that RDR will do nothing for your industry, which is your opinion, but reading the comments on blogs suggest there are a good many that think there are some good aspects of RDR, while perhaps the overall package may need tweaking.

@ Evan Owen, you are probably right that no matter how much regulation is applied, there will always be those that take the interpretation of the rules to the very limits and to the border of fraud, while just managing to stay technically within the law (if not the intent). Where there is money there will be opportunists and there will still be criminals, as the rules do not apply to them.

However effective rules and regulation, coupled with willing and honest adherence are more than a suitable substitute for effective supervision. Fact.

For those that actually believe the FSA are out to get you, they probably are, and for those that don't, they probably aren't...

And finally, quite often people are unaware that they are not doing the best job they could and are not necessarily aware that they are competent... Improving RDR (or at least attempting) in conjunction with the regulator has to be a more proactive approach then bemoaning all that they do, as it is, at the end of the day, just about peoples opinions and not facts.

An anonymous opinion from someone who claims to be sitting on the fence, are you comfortable with that? I'm not.

Come on, use your real name for goodness sake.

@ Evan Owen, of course I am comfortable, but thanks for asking.

If you really need a name, make one up... :)

@Usually found sitting on the fence

If you sit on the fence - you could end up with a splinter in your a**e! Personally, I thought Citywire had an issue with anonymous posts - after all we could be talking to Hector Sants - maybe we are!

PS: The comparison between the legal profession and that of the IFA is spot on. An IFA "DOES" represent a client in a win or lose scenario - its called commission. Of course some want to change this so the client pays either way - like the legal profession!

Are your seriously saying poor advice from an IFA is less likely to attract a complaint than that of a solicitor - rubbish! The IFA is the subject of the FOS who has jurisdiction to make binding awards of up to £150,000 and all without the longstop, statute of limitations, rules of evidence, right of appeal? Even the claim to the FOS is a freebie!

@ Simon Mansell, I sense that you are trying a little too hard to see a comparison. The IFA does not, nor should not be considered as representing their clients in a win or lose situation. And commission is not a win or lose situation. But obviously if all the other IFAs wish to come and correct me and inform me that IFAs work in a win/lose situation, then I will doff my cap.

At the end of the relationship with a legal professional you either have the outcome you desired or not. If not, then there must be a temptation to complain on the basis that you don't wish to pay for losing. With a financial advice, in my opinion, the relationship is much more complicated and generally built up over time on trust (at least that seems a popular claim on these blogs), so therefore is much more subjective and open to interpretation. On that basis, yes, I do think that there is a greater chance that poor advice is less likely to receive a complaint.

What would you suggest is a reasonable timeframe for the FOS to go back to and would you welcome a right of appeal through the law courts? I ask the timeframe as much of what financial advice is about is based on long term objectives, compared to the legal profession that often looks at shorter term issues (and I accept that neither is exclusive).

PS - I hope CityWire do not have an issue with anonymous posts, as there are some great posts and informative ones too, from those with no given name!

Generally I disagree with your comments so will leave most for others to debate.

However you ask specific questions that require answers:

Q: What would you suggest is a reasonable timeframe for the FOS to go back to?

A: The FOS can look at what they like but the compliant must be made within 6 years of the event or three years of learning of the event – as applied by Legislation to every other citizen in the UK and his dog under The Limitation Act 1980

Q: And would you welcome a right of appeal through the law courts?

A: Yes of course and remember the FOS complainant already has just such an appeal from the FOS to the courts. Judicial oversight is important – ain any country other than Robert Gabriel Mugabe’s Zimbabwe

Q: PS - I hope CityWire do not have an issue with anonymous posts?

A: They do and were the first to stop them - unless your true name is Hector Sants?

PS Citywire is regulated by the FSA!

Thanks for the response.

Agree that 6 years should be more than sufficient. There may be a small grey area as to when the 6 years starts and perhaps some advice will need some additional rules (pensions, perhaps?)

Agree that the final say on any dispute should be through the judicial system. Although it would be hoped that most would be resolved long before the need to go to court.

I am not Hector, if I was I doubt I would be posting on here... I would however have been changing the rules, but I imagine my ideas would have also been equally unsavoury to some. ;)