Over the years my hard-nosed attitude to IFAs has mellowed somewhat. Call it the onset of middle age. Call it a loss of raging testosterone. Call it a late-found maturity. But I have come to love the profession I once criticised at random, and I now respect it – hugely.
A close friend perfectly summed up my journey on the Road to Damascus the other day in a dummy copy of an adviser magazine she has been working on for quite a while (not a rival to Financial Adviser I hasten to add, more of a magazine where advisers can feed off good ideas from a range of professionals in related fields).
“I know in his deep and dark past he has not always viewed IFAs with the respect and appreciation that is our due,” she wrote in the foreword for the dummy, “but the years have seen him mellow and convert, and happily he is now an IFA aficionado.”
A fair summation of the Jeff Prestridge 2016 model, although an aficionado of good, hard-working, client-loving IFAs is more precise. I still do not like those who sully the profession’s name (as indeed I do not like those journalists who blacken the reputation of journalism).
We all know in our hearts that independent financial advice is financially enhancing for most people who receive it. In many instances it transforms their lives, putting them on the road to financial Damascus.
But unfortunately, advising is a profession – a bit like print journalism – that is in slow decline. In a world where many people now expect something for nothing, face-to-face independent advice is increasingly passé. Many people are not prepared to pay up front for it – as, indeed, most people are not prepared to pay for the printed word. It is quite ridiculous that most people consider stumping up more than £100 for advice as a step too far – in the same way as many people baulk at paying £1.60 for a Sunday newspaper (less than a cup of coffee at Starbucks). Where have we got to? Where indeed.
Advising is a profession - a bit like print journalism - that is in slow declineThe decline in adviser numbers in recent years has been rapid. Some 9,000 advisers (net) have given up the ghost since 2011. Like newspaper sales (sadly), the numbers can only go one way – down.
We all have our views on the retail distribution review (RDR), the main cause for the decline in adviser numbers. Most of them are critical, but we are where we are and there is no turning back. Independent financial advice is a dying art, practised by middle-aged professionals, primarily for people with serious wealth at their disposal. Indeed, advisers are becoming increasingly particular over whom they take on board as new clients. Advice is now an exclusive club for the well-off to benefit from.
This brings me nicely onto the Financial Advice Market Review (FAMR) that was launched last summer and which finally published its long list of (woolly) recommendations last week.
Although some experts seemed enthused by the 28 proposals put forward for closing the financial advice gap, put together by a crack team drawn from the Financial Conduct Authority and HM Treasury, I was not. I found them as exciting as a wet weekend in Bognor Regis, staying inside a caravan with three screaming children and a temperamental Westie (I did it once – never again). It is a report compiled by people who have no feel or love for the financial advice industry. Written by technocrats out of touch with the real financial world.
There is precious little to be found in the report that can be used effectively to plug the advice hole left by the RDR earthquake and to help grow IFA numbers.
On the plus side, it is good that the report looks at ways to make it easier for new blood to come into the advice market and go on to make a good fist of it (recommendation 5).
The idea of people being able to dip into their pension fund to pay for pre-retirement advice (recommendation 14) is also a sound one. If such a proposal means more people end up taking advice rather than looking for help from Pension Wise – or the organisation that evolves from the smashing together of Pension Wise and The Pensions Advisory Service as outlined in last week’s Budget – I am four-square behind it.
Oh, and yes, I’m a strong advocate of making financial advice more readily available through the workplace (recommendation 13) – an advice route made more feasible by the Chancellor increasing the tax relief available to employers in last week’s Budget from £150 to £500 per employee.
Nearly everything else in the report underwhelms me. The idea of robo advisers (recommendation 9) taking control of our finances makes my skin crawl. Robo-advice and banks are a combination made in financial hell, not financial heaven. It will be a miracle if such advice does not bring about yet another bank miss-selling scandal at some stage in the future (a better bet than Annie Power was at last week’s Cheltenham Festival).
It is also a shame that the review has refrained from putting a time limit on clients being able to seek redress from advisers via the Financial Ombudsman Service for alleged past mis-selling (recommendation 26). It cannot be fun running a business while constantly looking over your shoulder wondering whether someone is going to come out of the long grass and pursue a claim against you for something you did 20 years ago.
My verdict on FAMR is that it is not worth the paper it is written on. Long on words, long on waffle but short on effective remedies, most of which will never see the light of day.
I promise you, little will change as a result of this report. Independent financial advice will continue to wither on the vine, the advice black hole will remain and most people will end up with poor financial outcomes. It is the way of the financial world, post-RDR. Sad. Bloody sad.
Jeff Prestridge is personal finance editor of the Mail on Sunday
