Rise and fall

The FSA has admitted its light touch approach to regulation was key to the rapid growth in the independent financial services sector.

More regulated environments were competing for the space but the IFS had the magical formula of a stable and trusted banking system and light touch regulation - a formula for beating the competition and earning corporation tax revenues.

For a while it was a winning formula, but, when the global banking system went into meltdown, it almost became a formula for disaster.

A great deal of what went on during this rise and fall was of little value and use to the individual investors and the banks showed they did not have the discipline to control this wave.

The complexity and range of investment products created for the retail and corporate sector was confusing and seemed to serve one purpose. That was to make money for the bank, not the customer. I know this, to many, sounds harsh or unreasonable but that is how the man on the street perceived it.

So, for IFAs now, the challenge in this time of crisis is to turn around this perception in the minds of customers.

The market is in a renewal and reorganisation phase of emerging from chaos and collapse.

But at present, the IFA has a much better chance of regaining the client confidence and trust of the customer than a semi state-owned bank.

Consumers know that the banks are complex and sophisticated but also understand that they are greedy, cynical and self-interested.

So now is a time for IFAs to reinvent themselves, a great opportunity to revisit the customers' real needs and deliver a product and service which does the basic job at a cost that is reasonable and allays all fears of IFA greed and self-interest.

IFAs now need to voluntarily take the step over the line and completely professionalise the industry.

It is not a new problem but it is necessary if IFAs are to win back customers.

Customers need to believe in the brand and its values to purchase products and services without question.

This means change - and lots of it - in an industry that traditionally does not respond readily to it and indeed may well feel it has already been subjected to too much change.

This is paradoxical but quite normal. As a management consultant I have often seen how enforced change always feels many times more painful than voluntary.

IFAs will have dealt with the old conflict issue. They will be able to honestly say: "I am selling you a service irrespective of commission, I am your real financial adviser and I am a broker who complies with the FSA regulations."

They will have overcome the conundrum that is not unique to the IFA industry - look at estate agents for example - which goes: "I get a commission for selling to you, so I will do anything to get that commission even if you do not necessarily like it. Anything for a sale."