Why the Money Advice Service must change

mm

In the real world, businesses set their objectives with a rigorous examination of the benefits, the resources available and the likelihood of achieving them. Very often plans have to be changed and difficult decisions taken to ensure that the business remains viable. Above all the shareholders of the business will hold management accountable to ensuring that plans are sensible and that they are delivered.

In the fantasy land of the Money Advice Service (MAS) none of this seems to apply. When a Quango acquires a statutory objective, they also get a key to the money printing press. Their budget for 2012-13 of £80.8m is their estimate of what they need to deliver the objectives given to them.

Changing the guard

mm

Will the appointment of John Griffiths-Jones change the way the Financial Conduct Authority will operate?

As with all appointments to the regulator, it is vital to study what their public pronouncements are. When appointed as FCA Chief Executive, Martin Wheatley said “I want to ensure that FCA delivers a regulatory regime which ensures market confidence and delivers strong consumer protection.”

And all the signs are that this is exactly what he intends to do.

For the observant, there have already been signs that things are changing.

The thin end of the wedge

mm

I see that the trade press has finally picked up on a case where a PFS member has been disciplined under the Ethics code for excessive alcohol consumption and aggressive behaviour at a PFS event.

There have been over 50 comments added to the story and reading them is a fascinating insight into the attitudes and approach of our profession. The views expressed range from outrage at the action to total support for the PFS.

Network Charges – Bundled or Unbundled?

mm

It’s long been a gripe of mine that many AR firms don’t exactly know when their chosen network is making a turn. It’s quite amazing when you think about it – whilst RDR is making the cost of advice crystal clear to consumers, and the FSA is driving transparency into the mystic world of bundled platform charging, advisory firms are a little foggy over their network charges.

An oft-quoted benefit of being directly authorised has been ‘at least I know where I stand’, but being small and DA may be a bridge too far for many IFA firms in 2013. So, to pose a simple question, why can’t firms know where they stand AND be in a network? These are not incompatible concepts.

Developing a Non-advised Proposition – Part 2

mm

Last week, I looked at the “advice gap” and why providers will increasingly see this as an attractive channel to complement their intermediated strategy.

As we approach RDR, professional adviser firms are putting the finishing touches to their customer proposition and pricing. So what is the best way to service clients with simple needs or where the cost of giving advice is not covered by the fee collected?

It has always been true that advisers have provided advice to clients where the commission does not cover the cost of the advice. Does this make sense in the future? Some advisers will set out a minimum fee for their service and some will set out a minimum investment before they will provide advice.

Developing a non-advised proposition

mm

As RDR has developed, learned commentators have predicted that there would an advice gap, created by IFAs moving upmarket. Many also predicted that this would see the return of the insurance company direct salesforce.

But so far, this simply has not happened. The Man from the Pru has re-appeared but only to service the orphan clients from the original salesforce. As I write this article, I see little likelihood that any insurer will take the risk of launching and then managing any kind of advised distribution channel. I say this for two main reasons; firstly that they lack the risk appetite for giving advice and secondly, that they also see that the economics of a single tie focused on lower value clients cannot ever be positive.

No, to a man, they are putting their faith in three solutions:

Helping to build businesses – it makes Sense

mm

Here at Sense we love to recruit a new member of the Network. Unlike many Networks, we take the time to get to know our new members and we like to feel they’re part of the family from day one. But is recruiting new members profitable for us? Is it viable as a short term business model? The answer is simple – and as you might guess, the answer is ‘no.’

That’s a parallel with most IFA businesses. Unless it’s a very big case, I doubt that many IFAs ‘make a profit’ the first time they recommend a product to a client. Fact-finding, compliance and back office work all have to be done and they all have cost implications.

Why Sense is staying independent

mm

Sometimes it is difficult to predict how a fundamental change will play out and the debate over independence versus restricted is a classic example.

Every week, there is a new survey predicting the opposite of what we read the week before, so who to believe and what are the real issues involved?

Herding Cats

mm

Just how do you get a few hundred self-employed IFAs to do the same thing? This is the conundrum facing the traditional national IFA model in which advisers have been given, over the years, freedom to express themselves in choosing investment vehicles. And it’s a big one.

Fighting on the beaches

mm

As an avid student of history, I have often wondered what it was like to live through the Second World War. From the despair of defeat in 1940, through years of changing fortunes to the final triumph of victory and the hope of reaping the prize of a better world. Six years in which the old order was swept away to be replaced by a new set of realities, challenges and threats.

When Calum McCarthy fired the first shots of the RDR at Gleneagles back in 2005, who could have predicted that 7 years later we would still be waiting for the end? And, in many ways, RDR has felt like a war.