IFA News
If our system of advice can’t help with interest-only shortfalls then what is it for?
Wednesday, May 8th, 2013

This blog has occasionally raised concerns that the post-RDR advice sector could become increasingly irrelevant in public debates as it retreats to advising Upper Middle Britain.

Is there now a chance it could become irrelevant for something that is much more than a debate but also a public advice challenge – the interest only mortgages shortfalls facing 1.3 million borrowers. It is certainly a significant litmus test.

Of course, the issue can be overblown. While there is not necessarily a need to panic, there is a need for advice. But any consideration of the various options – moving to repayment, creating a savings and investment plan, down-sizing – would be better done with financial advice than without.

However the dynamics of the market may not lend themselves to allowing advisers to do much about it. In a world with more flexible regulations, advisers might set up bespoke workshops to help people consider their options. With more flexible regulations, mutual funds or even structured product providers might even hold out their investment products as a means to build enough money to bridge the gap. But with the endowment crisis complete with ‘shortfalls’ that led to complaints about advisers, there is very little chance any investment firm would risk their reputation even if the regulations allowed.

That strikes the Money Debate as a little odd, because taking a little bit of stock market risk, or even, with a structured product, some counterparty risk, might point to a way out for some slightly braver borrowers. That is bad news for society and perhaps bad news for advisers too.  But the big challenge must be regulators. If our advice infrastructure can’t help with this issue then what is it and all the related rules and regulations for?

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Three quarters chartered? Just under half sounds more likely
Thursday, March 7th, 2013

Skandia has issued a press release which makes for pretty interesting reading but I don’t – quite – agree with the main conclusion – that as many as three quarters of financial advisers could soon be chartered.

The release says that while only 16 per cent of advisers are currently qualified to chartered status, 27 per cent are studying towards it, and 33 per cent are thinking about it. I think it will take a lot to translate those thinkers into doers. It does however set up an interesting situation where almost half of advisers will be chartered and another half will not.

Personally, I remain unconvinced about whether we really need to push higher, and certainly not by raising the compulsory minimum any time soon. I think the need to pass more exams plus gap fill and hold a statement of professional standing is a pretty tough regime.

Of course, an almost fully chartered industry would be better for the individual advisers, it would be better for clients especially those with complex advice problems but there is a risk it could also push up the price quite significantly as those advisers may well seek to be paid more. That applies even were chartered to become some new sort of entry level.

What is also interesting of course will be the fact there will be a clear divide. Previously the vast majority of advisers were at or near the minimum.That will not be the case now so peer pressure may be a factor so it might get closer to Skandia’s estimate.

As for the hoards of new restricted advisers – oh look – there aren’t that many. Eighty-three per cent say they will definitely stay wedded to IFA status. For providers and platforms working out how much resource to devote to their restricted strategy, it may give pause for thought.

Finally, I may not quite agree with the conclusions, but there is one very good thing about the research. It’s from nearly 500 advisers so most likely it represents a reasonable summing up of the situation out there in the market. Far too many surveys get published these days with very small samples. I doubt they would ever have got into the printed press in the past but the internet has an infinite appetite for copy. But with nearly 500 responses, this survey is probably a very good guide.

 

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SJP charging plans – a marketing opportunity for IFAs?
Tuesday, December 18th, 2012

The Money Debate is a bit late to this one, but better late than never. This is an intriguing Money Marketing story from last week about St James’s Place charging plans post RDR.  The paper reports SJP will charge up to 4.5 per cent for bonds, five per cent for unit trusts upfront with an ongoing charge of between 2.1 per cent and 2.3 per cent. The sales advisers get three plus a half. You might say this could prove quite expensive, given some of the rather pessimistic scenarios for growth, inflation and markets. You could look at it that way. However may I suggest that IFAs view it through a different lens as a huge marketing opportunity, well, depending on their charging plans.

 

 

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