Do we need a financial voice of reason?

John Lappin

There is a host of issues that are of huge importance for investment advisers and their clients but that, arguably, cannot be influenced or even freely debated by the current representative structures for IFAs.

This is not to find fault with the Association of Professional Financial Advisers, which has been doing sterling work in trying to bring down the cost of regulation and to ensure the FCA’s actions are proportionate.

Nor is it to criticise the Personal Finance Society and the Institute of Financial Planning. These organisations are also making huge contributions to standards but they surely have enough on their respective plates.

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It has been my contention for a number of years, especially post the Retail Distribution Review, that we need to create another organisation that harnesses advisers’ knowledge base and experience, and applies it to the challenges facing not just investors, but society at large.

My view is that this is best achieved through an advice think-tank, perhaps, though not necessarily supported by the existing professional bodies. And even though the think-tank structure is occasionally viewed by the more conspiratorial journalist types as a Trojan horse for corporate interests – attach ‘big’ to sectors like tobacco, pharma, oil for example – in the case of advice I think the very opposite is true.

It would allow a financial planning voice of reason to be injected into all manner of debates. Here, for example, are five areas ripe for consideration.

• The annuity revolution, with reference not just to the advised part of the market, but also to self-select and guidance, with a strong emphasis on how to make sure misselling, mismarketing and misbuying do not happen on a widespread basis. It might even give advice on what new products might look like.

• The issue of long-term care. Although caught up in heated debates about IHT, death taxes and the like, it is very clear that with changing demographics, any future government of whatever hue will have to grasp this nettle. A measured report – and more than simply saying advisers must be involved – could seriously improve the tone and tenor of the debate.

• The issue of long-term investment, ie the perspective of advisers and their clients. Clearly Vince Cable wanted to see institutions holdings shares for the long term in Royal Mail but failed, and the whole political world is in a spin – and indeed spinning – over AstraZeneca. What is the investor’s perspective, and where do retail investors sit in terms of the debate over short-termism and long term holdings?

• A view on pensions tax relief not simply framed on the basis that it is a free source of money for funding other pet projects often recommended by most, if not quite all, other ‘political’ think-tanks.

• An update on modern portfolio theory and efficient markets and the range of tools used for financial planning, given the financial crisis, the great recession and all those new sources of hot money, which may or may not be gaming the system. Put it another way, do the fundamentals still apply in terms of portfolio planning?