Setting the standard for fully independent IFAs "too high" and "too quickly" will dramatically reduce the number of IFAs, says David Seaton, director of consultancy at Rowanmoor Pensions.
Seaton believes the RDR’s proposals for higher qualifications for advisers will drive up prices and ensure only the rich will be able to afford true independent advice.
The FSA’s proposals for advisers offering primary advice are even further off the mark, says Seaton.
He says: “The proposed concept of less qualified, less regulated primary advice sales forces plays into the hands of the banks and life assurance companies. It will take us back to the 1980s with large tied sales forces flogging highly priced products to the masses. This will be a disaster for the general public.”
However, Andrew Fisher, chief executive of Towry Law, told IFAonline the three to five year timeframe for gaining further qualifications is not too fast on the basis that a degree is achievable in three years.
“I don’t have a problem at all with it being a three year period. Maybe a bigger issue for the industry is that some people aren’t capable of achieving those qualifications, in which case they shouldn’t be dispensing advice.
“I think at the moment the prices advisers charge through commission are ridiculously high and fees will drop the prices for clients. The cost of education is necessary and I don’t think the price for one moment, for the end consumer will be higher.”
Fisher believes banks and insurance companies should pick up the mass retail market business on the basis they can run a well regulated and efficient advice system. He says the first piece of advice should be to pay down debt, which banks are well placed for.
He says: “It should be the domain of the banks and the insurance companies if they can get a sufficiently strong sales force in place.”
Have Your Say
"I have just read the article about qualifications and Andrew Fisher's comment that a degree can be achieved within 3 years, his comment is somewhat of the mark, I am sure that time allowing most IFAs could achieve this qualification however Andrew seems to forget that the majority of IFAs are either sole traders or 2 to 3 RI’s.
"Whilst I would love to be able to take the time out and continually study for the next 3 years to achieve these qualifications I am also trying to run a business and balance this with the fact that I also have a family and a social life. I think the majority if not all of the people involved in these discussions have lost touch with the real nature of running a small IFA practice.
"I do not believe that changing the way we are remunerate or having a fancy title will make one spot of difference to our industry, in the 20 years I have been around many changes have come and gone and the industry really has not changed. We are a people industry, whether we charge fees or commission is not what the public want, they want someone who listens to their problems, puts together a solution and looks after them on an ongoing basis, how we are paid should not come into it. Being paid by commission or fee does not matter as long as you build a long term relationship with the client.
"People nowadays are cash rich and time poor and having someone there to organize their finances is what they need. By charging fees many people will no longer have access to financial advice. I have been trying to charge fees for 4 years and people would rather have me paid by commission as long as a provide a good level of service and keep in touch. We can only justify charging fees and or commissions if we provide an ongoing service. If you do this your customers become long term clients. There are many ways that we can provide a professional service to our clients and the debate on whether we are paid by commission or fees is not one of them."
Carl Hope Douglas is an IFA at Hope Financial Management.
"In response to the comment that a degree can be obtained in three years I would like to add that your average student does not work a 70 hour week, have to deal with a great deal of external factors that take up time (other than getting drunk etc!) and also gets a grant or loan to pay for such studies.
"I recently applied to take the J05 exam; I have to wait until October to take it then if I fail due to a lack of study time I cannot take it for another six months. Maybe these exams would be better sat every three months rather than six monthly. Under the current system taking one exam every six months it would take three years to get AFPC."
Paul Yallop is an IFA at Parklands Independent Financial Services.
"I very much admire Andrew's comment that the timescale for qualifications in three years is reasonable 'because a degree can be obtained in three years'.
"Perhaps Mr Fisher should remember that a degree is achieved in three years on a full time basis, and not outside the constraints of a 60 hour a week job.
"I would also point out that all those 'pension specialists' who passed G60 between 1980 and 2004 have a qualification which wasn't obtained under the current legislative framework.
"My view is that if exams are required in a given timescale, all previous exam passes should be nullified, and everyone starts with the new framework, based on the current rulebook. That would ensure everyone understands the new regime in every sector of financial planning.
"I am afraid an FCII from 1985 is about as useful at the apex of today's industry, as a World War One fighter aircraft mechanic being put next to an F16 and being asked to service it."
Michael Inkley is director of Sanderson Law Pensions Management.
"Sadly, Andrew Fisher is misguided in believing that banks are well-placed to advise consumers to 'pay down debt'. Branches have weekly lending targets, not weekly debt repayment targets.
"The recent BBC undercover investigation of Barclays on its Whistleblower programme showed that branch staff are under intense pressure to upgrade accounts and sell general insurance. Two weeks later, a Barclays director received a bonus in the millions. Ladies and gentlemen, there is a connection between the two!
"He is confusing High Street Banks with Consumer Advice Bureaux."
Paul White is an IFA at Belgravia Insurance Consultants.
"What kind of 'cloud cuckoo land' is Andrew Fisher, chief executive of Towry Law living in? He says 'a degree is achievable in three years' - Oh yes the one where you go and study for a degree full time will usually take three years (assuming you decide not to take a 'gap' year and travel the world). So how do all the current advisers running their own businesses earn a living for three years?
"Mr Fisher wants to see the wholesale cull of the vast majority of the IFAs so there will be an exclusive club left to dispense 'independent fee-based advice' and he doesn't think 'the price for one moment, for the end consumer will be higher' . Well I think Mr Fisher has no comprehension of how business and markets work - If there are considerably less numbers dispensing advice there will be no competition and the cost for the 'end consumer' will go up in an uncompetitive market.
"Mr Fisher keeps banging on about 'gaining further qualifications' to dispense advice to 'end consumers', yet most IFAs will tell you they don't deal with 'end consumers', they talk, advise and empathise and build on-going relationships with their clients.
"And as for the banks picking up the mass market and are well placed to advise to pay down debt - what a joke. The mass market, which I can tell Mr Fisher hardly ever comes in to contact with, not only have very little understanding of financial planning but are totally out of control with the debt poured on them by the irresponsible lending practices of the banks and finance companies.
"I always remember one of our IFA colleagues commenting on why did it take hours to process a monthly £100 ISA unit trust sale to improve wealth for a client, yet a bank can sell a £10,000 loan in a matter of minutes. That's regulations for you and some people don't know why there is a savings gap - no encouragement to save and lots of pressure selling to go further in to debt.”
Anthony Fallon is an IFA at Fallon Associates.
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