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David Prosser’s poorly written and researched article has – rightly – caused a deal of debate, and drawn fairly negative content. And I would agree with much of that.
However, his article does raise the issue of the ‘Big Lie’ problem with the Financial Media, and the danger of allowing a specific descriptor – in the case IFA – to become a generic descriptor – Advisers. In other words, all vacuum cleaners are Hoovers, and all ballpoint pens are Bics.
This was illustrated a little while ago, when a journalist wrote about the ownership of ‘Single Tied IFA’s’!
And to be fair to Mr Prosser, I suspect that’s what he has done here. He predominantly lists issues caused by Product Providers and Direct sales / Tied agencies, and labels them all IFA’s, because IFA has come to mean ‘Financial Services’.
Let’s look at what he said:
“It doesn’t take a rocket scientist (or even a Financial Planning Certificate (sic)) to work out why IFAs are so poorly regarded. In the 20 years I’ve been writing about personal finance, a new scandal implicating IFAs in bad practice or outright dishonesty has emerged roughly every two years. From mortgage endowment malpractice to personal pension mis-selling and from precipice bonds to split-capital investment trusts, the list of shame is a lengthy one.”
Running through that list, who was involved
Mortgage Endowments – Could this possible have been mainly Mortgage Advisers at Banks and Building societies?
Pension Mis-selling – This is where the ‘Big Lie’ really comes home. I’ll come back to this
Precipice Bonds – Umm, Manufactured by who? And most fines were levied against the Banks, I believe?
Split Caps – Remember the ‘Magic Circle’ of firms that colluded with each other and hid the content of the product from IFA’s? In short, this was predominantly an issue of Manufacturing.
So, at best, the issues listed are shared across Product Providers, Banks, and Tied agents as well as IFA’s. But does he mention those? No. Apparently everything is down to IFA’s, even when they actually had nothing – or very little – to do with it.
Let’s go back to Pension Mis-selling. I am sorry to be non PC, but this has really come back to bite us. Whilst there was a lot of very poor advice given at the time, the picture is not as simple as the sound bites suggest.
Who remembers Pension Schemes changing their structures from 90th to 60th in order to artificially increase the amount of ‘Compensation’ payable? I do. Who remembers Critical Yields of 20%+, showing that the original transfer was not a fair value, but that the scheme had hopelessly ripped off the member? I do. I even remember that an IFA who rescued a client from Maxwell’s theft of the Mirror group pension scheme – who remembers that particular piece of media achievement? – had to pay ‘Compensation’ as if the theft had not taken place!
I could go on. But who remembers the mood of the time? The ‘Let’s just get it done and forget it’ approach?
I remember that when IFAA tried to raise these issues, Garry Heath was shamefully stabbed in the back, and the providers and Networks formed AIFA in competition to the IFAA. It worked, IFAA shut down and with it the last bit of resistance to the ‘Mis -compensation scandal’ died.
And now the particular spin on these events of 15 and 20 years ago are constantly raised and thrown at IFA’s, with the assertion that we, and we alone are to blame and must pay penance.
I could compare that record to Journalists who have ramped share prices for personal profit, hacked mobile phones and bribed police officers. One national Broadsheet continues to attack charges on pension funds, whilst selling the services of a tied salesforce with much higher charging funds. Could there be a kickback or commission involved, do you think? But wouldn’t it be unfair to blame the innocent majority for the sins of the few?
And we have had sinners. Let nothing I’ve said take away the fact that we had had our share of idiots. I hope that most of these are gone. But if we come across any still around, we should whistle blow to both the FCA and their professional body
Mr Prosser mentions trust. Well, here is the thing. When asked, of those who don’t trust Advisers, 82% could not give a reason. It was ‘Well, everyone knows’ and ‘I read it in the paper’. In short, the sort of ill researched, blanket damnation in Mr Prosser’s article goes to form the public impression, which he then goes on to cite as the evidence that his assertions are correct! Circular feedback?
The same research about trust – by the FSA by the way – shows that, actually, of everyone in Financial Services, IFA’s (Note – that means Independent Financial Advisers) are the most trusted Advisers in the UK. And always have been. And when compared internationally, guess what? We are the most trusted there as well.
Perhaps clients are really not quite as naïve and gullible as the press assume?