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Protect the vital aspect of advice

The seeds of RDR were sown in 2006. The recently deferred rules on capital adequacy were formulated in 2008. The recent changes to investor information documents were discussed in Europe in 2007. Recent FSCS comments indicating increasing support for alternative models for funding investor compensation follows at least 10 years of representations that the current system is fatally flawed.

What should this tell you? That changes to how we are regulated (whether for good or for ill) take years in conception, formulation, consultation and implementation. This in turn emphasises how important it is to have a place at the table when changes are first contemplated.

My sadness in being forced to admit that the naysayers were right, that IFAs would never join a membership organisation representing independent advisers, is that this means that there will be no one totally devoted to the interests of the independent adviser sitting at these tables.

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Many advisers who decided against joining IFA Centre explained that their professional bodies represented their interests. They do not. Their concerns, their lobbying, lie with professional standing, chartered or certified, not regulatory status, independent or restricted. I will never diminish the importance of professional qualification, but it is quite simply different to the decision to be independent or restricted.

Many discussions on this subject end up reverting to comparisons with other professions. I have concluded that comparisons with accountants and solicitors are flawed for one important reason: they only ever sell knowledge.

I prefer the comparison with medicine, where professional knowledge is intertwined (or maybe tainted) with the commercial world of the product provider. I am only too well aware that financial planning in all its variations is not about products, but the simple fact is that it is very rare for a financial plan to be implemented without products.

This is why IFA Centre’s campaign to ensure that product providers are held to account by regulators and made to pay for their failings is vital. Criticising colleagues for the quality of their advice detracts from the need to focus on the responsibilities of product providers.

I do not diminish the damage that poor advisers giving unsuitable advice has on the reputation of IFAs as a whole, and clients receiving poor advice must of course be protected, and compensated if necessary. However this must be treated as a separate issue otherwise good advisers will always end up paying for the inadequacies of product providers, through increased professional indemnity premiums, lack of PI cover, and increased FSCS levies.

The most disappointing aspect of the decision to close IFA Centre as a representative organisation is that everyone I met at the FCA, FSCS, Treasury select committee, All Party Parliamentary Group and in parliament ascribed huge importance to it speaking up for independent advice. More importantly they know, arguably more than advisers themselves, that IFAs need a strong, passionate and knowledgeable advocate.

They liked IFA Centre’s own independence, funded entirely by subscriptions from members committed to independent advice, not by product providers whose interests lay more in protecting their own commercial distribution channels by whatever means than the real interests of the advice community.