OpinionOct 7 2015

Begone, crazy costs

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Begone, crazy costs
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Indeed, along the way, I have fallen hopelessly in love with one or two of you (sorry, a story for another day).

On the whole, with the exception of one or two rogues (you know who you are), I find that financial advisers are good people with the gift of the gab. Put you in a room full of strangers and by the time the last cocktail has been consumed you will have given your business card to at least half a dozen people who had not known, but do now, that they are in need of financial planning.

You are well-dressed. Gregarious. Confident. But what I love about you more than anything else – in a society where the internet and the impersonal now dominate – is that you care about your clients with a singular passion. You are people persons. The client is king. Tender loving care – TLC – courses through your veins. If only our regulator espoused even a smidgen of such TLC from its lofty Canary Wharf eyrie.

As I know, clients can become genuine friends, such is the close bond between the two of you.

This connection can be so strong that clients will readily stick to their adviser through thick and thin; through scandals such as Arch Cru or sleepless night-inducing stock market corrections. It should not be any other way. Client and adviser in perfect harmony.

I was reminded of just how strong this bond can be only recently when I had the joy of speaking to a wonderful woman called Angela Healy who for the past seven years has received the benefit of financial planning from Neil Rossiter, a chartered financial planner with Blackdown Financial in Taunton, Somerset. A top financial adviser, no less, according to the latest customer ratings survey issued by VouchedFor.

What I loved about speaking to this inspirational 66-year-old lady was not the fact that she is overjoyed that Neil has sorted out her finances (she is) but that she now views him as a friend, whom she trusts implicitly, and who has given her the confidence to retire and enjoy spending her hard-earned money.

Neil, as all good financial planners do, hands out TLC by the Brean Sands bucketload. A counsellor as well as a planner. A friend as well as a continual dispenser of sound financial advice.

Given that this is the way the financial world should be – client and adviser working in perfect harmony rather than customer and bank salesman acting in disharmony – it perturbs me greatly to learn that many good financial planning firms still remain under remorseless regulatory siege.

In a nutshell, the cost of remaining an adviser is rising by the day as professional indemnity premiums, regulatory fees and the levy from the FSCS all soar to new heights. Other trades would not tolerate it.

Take the FSCS, for example. In April this year it announced its levy for 2015/2016 – a staggering £319m compared with £276m in the previous year. Of this, a whopping £100m applies to life and pension advisers.

At the time, the boss of Hargreaves Lansdown described the levy as “crazy” and “an unfair burden on reputable and blameless firms”. Spot on.

Some now believe that these spiralling costs are in danger of killing independent financial advice. Or more likely, of driving the industry ever upmarket in search for clients, so disenfranchising thousands along the way – the Angelas of this world.

Take Neil’s Blackdown Financial as an example; a business that goes about its work in both a thoroughly professional and gently provincial way, never taking big risks or courting controversy. It does not deal in unauthorised collective investment schemes or toxic investments.

Despite this conservatism it has just had to hand over a cheque for £10,418 to the FSCS. Last year, the bill was £5,279. FSCS costs alone now consume 5 per cent of Blackdown Financial’s turnover.

Add in professional indemnity premiums and FCA bills, and it is no wonder that Blackdown’s managing director Lee Tomkins says the firm is constantly running just to stand still.

Like many in his profession, he now believes the FSCS funding model is unsustainable as fewer advisers remain in financial services to pick up its bills. It needs an overhaul.

Hertfordshire-based Richmond House Group agrees. It feels so aggrieved about these crippling costs that it is now urging the FCA to conduct an independent review of the regulation of financial adviser firms and the FSCS.

It has launched a petition on the matter which can be signed at www.goo.gl/chDA8d. All advisers of sound mind should support it – I certainly have.

So far, a little over 700 have done so – a pitifully small number, really, which I put down more to poor publicity than a lack of support among the adviser fraternity.

Most of the comments on the petition refer to punishing increases in FSCS bills. “Unfair”, “not sustainable”, “flawed” and “a broken model” are all words or phrases used by supporters of the petition.

Richmond managing director Paul Beasley does not mince his words either. He says the levy is “fundamentally flawed and inherently unfair” – and “does nothing to increase consumer confidence”. He implores the financial adviser sector to voice its concerns “before it is too late”.

His company’s petition may go the way of most petitions – absolutely nowhere. But that is not to undermine its importance in raising a key issue.

The funding of the FSCS needs to be reassessed in the interests of sustaining a viable IFA community in which consumers like Angela Healy are given the financial care and love they deserve. Nothing else will do.

Jeff Prestridge is personal finance editor of the Mail on Sunday