The Treasury Committee announced last week it wants to extend the Citizens Advice Bureaux's project of working with IFAs on a pro bono basis as part its work on promoting financial inclusion.
The committee’s report calls for an increase in the funding of generic financial advice and suggests CAB’s project with IFAs is expanded through additional money from the industry and the Financial Services Authority’s (FSA) financial inclusion fund.
But are IFAs willing and able to sacrifice time spent servicing clients and dealing with business matters to giving advice they won’t be paid for?
Tracey Mullins, director of public affairs at the Association of Independent Financial Advisers (AIFA), admits the financial services industry is not a social service and it is generally not prepared to do things for free.
Moreover, she points out while providers may have funds to use for social responsibility projects, most IFAs do not.
But Mullins says it is important any campaign which aims to raise awareness and promote financial inclusion involves advice because information alone is not enough.
“There is a place for information but most consumers need to follow this up and receive tailored advice. There is a gap the government is trying to fill but they cannot fill it by information alone,” says Mullins.
Evan Owen, head of the IFA Defence Union (IFADU), believes retired and/or disenfranchised IFAs could give generic financial advice, but when he approached the FSA for help in contacting them, he did not receive a reply.
He states: “With thousands of retired or simply departed IFAs out there it wouldn’t take them long to get up to speed and advising people through the CAB and council offices. I told the FSA that we could use their list to track the advisers down and see how much it would cost to set up with a bit of funding from here and there.
“I believe the only fly in the ointment was my expectation that these people should not be subjected to claims for compensation at some future date given that they weren’t ‘arranging’ contracts but simply providing generic advice where none is available at the moment.”
David McMeekin of Foundation Financial asks how the CAB would spend any extra funding in light of the fact IFAs would be providing a free service.
He argues: “The FSA staff member who would write the cheques would no doubt get his or her own wages, and perhaps they propose that the industry pay for additional CAB offices and expenses. Would it be fair to suggest the FSA spend some of the money from their financial inclusion fund on giving IFAs a rebate on their FSA fees – remember that IFAs are the source of the financial inclusion fund – for working on a pro bono basis?”
Unless IFAs get a rebate on their FSA fees, McMeekin says they would effectively be paying for “the privilege of working for nothing”.
Rod Leonard, IFA at Cheshire Trafford, adds: “Here we go again, our fees funding the Treasury’s wonderful ideas through the FSA. It’s another Treasury stealth tax on the industry.”
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 7968 4554 or email [email protected].IFAonline
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