evolution within sector
“There is now a real opportunity for IFAs to demonstrate the value of
independent advice to consumers. Firms must take advantage of the
distinction that the FSA’s Retail Distribution Review has made
between those who are on the side of the consumer and those who
represent a product provider.”
available, or is there something more “It is also important that the product cost advice and those offering restricted ad-
fundamental? “The key differentiator is is discussed and agreed – there is an vice from a limited range of products and
one of approach. The IFA is someone ongoing management charge associ- providers.”
who wants to be on your side of the desk ated with many kinds of investment.” “There is now a real opportunity for
and working with you as a small busi- IFAs to demonstrate the value of inde-
ness which understands your position. pendent advice to consumers. Firms
IFAs want you to keep on using them
Process of change in sector
must take advantage of the distinction
because they have given you good ad- Charging fees rather than accepting the RDR has made between those who
vice. They are your agent so have to pur- commissions is not the end of the evolu- are on the side of the consumer and those
sue your interests.” tionary process for the IFA. At the end of who represent a product provider. We
June 2009, the Financial Services Au- look forward to building on the high level
Move away from commission
thority published its Retail Distribution of trust consumers have in IFAs and rais-
Review (RDR), a consultation paper on ing standards of professionalism even
Reference there to ‘agent’ raises the the way ahead for delivering financial further among IFA businesses.”
question of commissions: is such a rela- services products to the public.
tionship compatible with an IFA deriv- Chris Cummings saw it as a positive
ing a commission – albeit one that has and considered set of recommendations
Reacting to opportunities
to be declared upfront to the client? No- that the AIFA believes will benefit con- The AIFA Director General and his col-
one would suggest that the expert ad- sumers, and allow the development of leagues could be forgiven for their
vice which the IFA will have researched the wider industry and IFA profession. enthusiastic endorsement of the inde-
and presented can be delivered as a “We broadly support many of the recom- pendent route to market.
charitable act. For the financial adviser mendations in the paper. FSA has rightly But they make a strong case that the
to be rewarded on the basis of a com- refocused the review on the needs of the tied representatives cannot answer. It is
mission paid by the product vendor, how- consumer with the proposals offering not a question of professionalism or in-
ever, leaves room for the suspicion that real clarity, creating clear blue water be- tegrity (although there are still examples
the ‘best’ solution for the client would tween those offering truly independent of poor practice within the investment
be the one carrying the highest commis- stables of the banks), but of scope and
sion rate. product range and the ability to think on
An underlying change in the remu- their feet.
neration rules, which will have been fully IFAs can react rapidly to changes in
implemented by 2012, moves away from the economy provided that the financial
commissions to a fee-based relation- sector has the tools to deliver, of course.
ship between the adviser and client. We are looking later in this edition at the
If a fund pays commission under the kind of investment product that IFAs can
new regime, the IFA cannot benefit from introduce to their clients’ portfolios; in
it. It will either be rebated against the this instance we will be examining the
fees paid, or ploughed back into the fund. rationale behind a UK property fund that
The industry is following a line of total is offering investors the chance to ben-
transparency, and that is in the greater in- efit from the recovering Prime Residen-
terests of the investor. IFAs make a strong case that the tied tial Market,
Cummings again: “When IFAs work
with a client, the cost of the advice has
representatives cannot answer. It is
The nature of the ‘product’ means that
to be agreed in advance. This will usu-
not a question of professionalism or
it can only be offered through qualified
ally be a flat percentage of the funds to
integrity (although there are still
intermediaries. There are many other fi-
be placed in a given category of invest-
examples of poor practice within the
nancial offerings which can only be of-
fered through that type of channel. On
ment. This can be settled upfront or by
investment stables of the banks), but
those grounds if no other, there is a case
agreeing to offset commissions where
of scope and product range and the
for selecting and working with an Inde-
these are payable.
ability to think on their feet.
pendent Financial Adviser. §
The Informed Executive
47
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