‘I’ trouble: Should you worry about how you label your firm?
Most people will continue talking about their ‘IFA’ whether that adviser is actually independent or restricted.
My father once had a job interview with the stationery manufacturer Scotch. It all went well, he had successfully navigated the usual “where do you see yourself in five years’ time?” type questions, the interviewer seemed impressed and he was feeling confident.
Then, at the end of the interview, the interviewer casually asked, “You do know what we make here?”
Without thinking, my dad replied, “Yes, of course, sellotape.”
“No, Mr Cudby,” came the response, in a suddenly more abrupt tone, “we make Scotch tape; Sellotape is our biggest rival.”
He didn’t get the job, but it’s hard to imagine a candidate who wouldn’t come unstuck with that question. Sellotape is a catch-all term for any sticky tape, irrespective of brand.
Sellotape is not unique. Hoover, Portakabin, Tipp-Ex and Tannoy are all examples of brand names regularly applied incorrectly to rival products. And the same can be said of ‘IFA’, which has increasingly become the catch-all term the public uses for all advisers, irrespective of their status.
While we in the industry go to great lengths to make a distinction between models of advice, the general public is largely oblivious. The FSA can put all the effort it likes into depolarisation, the RDR or any other attempt to clarify the distinction, but most people will continue talking about their ‘I’FA whether that adviser is actually independent or tied or whole-of-market or multi-tied or restricted or mint choc chip or whatever other classifications the regulator has dreamt up.
Most punters don’t even think about what the ‘I’ means or if it is relevant.
It is important to ensure the public appreciates the difference between types of advice, but we need to engage and educate them rather than changing labels
Those receiving genuine independent advice get huge value from it and definitely appreciate the distinction, but there are many more people out there popping into a high street bank to get advice from an adviser they inaccurately call independent and remaining oblivious to the fact there is any alternative.
I suspect even post-RDR, once these bank-based advisers have gone through the rigmarole of explaining the concept of restricted advice, most of their customers will nod, go along with it and then continue referring to the salesman as an IFA.
With just months to go before the RDR finally arrives, many advice firms are yet to confirm the model they will adopt in 2013. I suspect these companies are resigned to going restricted but waiting until they are absolutely certain there is no loophole available that will allow them to get away with calling themselves ‘independent’. I’m not really sure they should worry.
I am all in favour of independence and everything it stands for. Whatever label you apply to it, truly independent, fee-based financial planning is undoubtedly in clients’ best interests.