Providers do not give IFAs suitable training and relevant information to enable them to give advice on with-profits, according to the results of AIFA's first 'stakes in the ground' survey.
The Association of IFAs’ (AIFA) stakes in the ground project is designed to record the way in which business is carried out in certain areas during particular periods of time, and this first survey concentrates on the way advisers advise on with-profits in today’s environment.
The research of 564 adviser firms, which involved an online survey and qualitative interviews, reveals the general nervousness of advising in an area which has been the subject of much adverse comment has resulted in many advisers having an overly-cautious approach when considering recommending clients to switch out of with profits.
Although 85% of advisers feel they have sufficient knowledge to advise on with-profits, almost three quarters (72%) say providers do not give IFAs suitable training and relevant information to enable them to give advice.
AIFA says this raises questions about whether advisers’ confidence in advising in this area is matched by their competence, since a large number feel they are not equipped with the right tools to do the job.
Advisers find PPFMs (principles and practices of financial management) too complex and difficult to extract relevant and comparable information from, resulting in them resorting to using other forms of simplified information.
Of the 544 advisers who responded to the online survey, only 31% had completed a new sale during the past 12 months, which AIFA believes is evidence of the lack of confidence in with profits.
There is also a lot of mistrust about closed funds, with 54% of the online respondents agreeing with the statement that the disadvantages of holding an investment in a closed fund are sufficient in isolation to justify a client reinvesting elsewhere.
In spite of the fact many advisers are sceptical about with-profits investments, AIFA says they do review their clients’ situation objectively before reaching a recommendation.
The 35% of online respondents deemed firmly opposed to remaining in with-profits still confirmed adherence to proper processes of reviewing existing or new clients’ policies before advising a client on the action they should take.
In addition, nearly 50% said they had reviewed with-profits bonds, pensions and mortgage endowments in the mast 12 months.
Chris Cummings, director general of AIFA, says overall advisers seem to be providing ‘good practice’ when giving advice on with-profits, but there are some areas which still need to be addressed.
He states: “The prevalence of predetermined views about with profits means that advisers should be wary of pre-judging a situation. Less complex and more comparable information about the funds in question needs to be available from providers and advisers need to ensure they are fully informed about the details of the products on which they are advising.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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