1936: A Face in the Fog – Robert Hill
Finally, today that FSA have begun the process of telling the public what is happening to financial advisers from January 1st 2013. To clients this will not be news, to regular readers it will be not terribly new information, but for those of you that have recently found my blog, this may come as a surprise.
As a forward-thinking financial planner, I have operated on a proper fee system since setting the company up in 1999. What this has meant is that clients have clear fees for the advice they receive and clear implementation costs. This was quite radical at the time. Since 1999 we have improved our services and frankly, become an awful lot better at delivering them. So you would think that I’m pleased that the regulator is making everyone operate on the same basis. Well, not entirely. In the “good old days” (they weren’t) advisers were either Tied or Independent – which meant that they either sold you products from just one company or could search for the best from the entire market. This should have been better and probably was in 90% of cases, but as providers paid different levels of commission for the same product or vastly different amounts for the same investment but into different types of product, frankly the whole thing was open to abuse. So then came Multi-Tie to muddy the waters – a third approach, with you guessed it, the ability to sell products from a limited number of companies (typically 3 or 4). The next step was to say that to call yourself independent, the adviser must offer products from the whole of the market and offer the option of paying a fee instead of commission.
The new rules go a bit further – the adviser has to agree the cost or fee with the client (you) in advance. This can be paid from the product or directly, but importantly is not determined by the company that provide or “manufacture” the product. The implication being that Product Providers cannot sway what products they want to promote or “entice” new business. This fee agreement rule applies to all advisers. They also all have to have the same minimum (enhanced) level of qualifications. However, to be termed independent, they must offer advice from a broader range of investment products – which include unregulated ones, (called Unregulated Collective Investment Schemes) which can result in huge losses to clients. UCIS cannot be promoted to the general public. It is these products that are suitable for very few “normal clients” (by the FSA’s own admission) that are causing me and many fellow forward thinking advisers some concern. Basically a lot of them (but not all) are rubbish and not relevant to 99.9% of people. Yet in theory we are supposed to consider them for all clients, by researching, assessing and then ruling them out (or not) in order to remain able to use the term independent. In the majority of cases this will be a huge waste of time and client money. Simply saying we won’t or don’t do it, means we can only use the term “restricted adviser” – which applies to an adviser that does everything but UCIS or one that simply sells one type of product. To assume that the general public will appreciate the differences once the marketing teams have “had a go” is in my opinion somewhat naive. I welcome your thoughts.
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