Transact has always seen itself as a wrap apart that stayed clear of what might be called traditional financial services and its perceived ills. I think Transact would say that was the whole point. They definitely came up with a service that New Modellers needed at just the right time.
The latest missive to members of Transact is a case in point where the MD Ian Taylor discusses the myths down the years that have been spread about the business by rivals. I think we have heard some of these before. He then declares that with the RDR a couple of years away, some players are making hay before they have to start competing on quality rather than using commission.
He pulls no punches. Here is Taylor’s asessment of the three tactics.
Tactic One: Mislead the market
Examples: Spread rumours about FSA “thinking”. Propagate more myths about competitors. Recast assets under management numbers to create impressive sales “histories”. Create highly selective and flattering “comparison” sales aids. And so on…
Tactic two: Manipulate the market
Examples: Refuse to allow total portfolio value discounts to be taken into account when illustrating wrap platform pensions. Operate at a loss/cross subsidise to create artificially low and unsustainable changes. Pressure the media. Use patently absurd growth rates in pension illustrations. Pay overrides to third parties. And so on…
Tactic Three. Control the market.
Examples: When all else fails, buy the distributor.
Taylor says that he has issued this in response to concerns raised by firms using Transact. He is also looking to get more responses and examples of poor behaviour.
I find myself in two minds about this. I have never seen anyone land a critical blow on Transact. It has to be respected as the leader and one of the first movers in the UK. Its service and its advisers stand scrutiny.
It is interesting that we have seen similar comments from Nucleus in the past. The great divide that has opened by between new and old IFAs appears to include wrap providers too or as they would probably argue wraps, platforms and fund supermarkets.
I don’t agree with all the list. I’m afraid I’m long past worrying about providers buying IFAs. It gives them capital and nothing I have seen has looked like a particular abuse of the independence rules from say Origen or Bluefin for example. With pressure on the media which I assume must be the trade media – well my experience would suggest that most editors are not pressured by the commercial side of things, and if they are manipulated by PR most are aware of the risks involved and try at least to give both sides though the web has brought a new set of time pressures.
However the other criticisms are important. There is of course a risk of reputational damage to the whole of financial services if there is a last free for all on commission.
Perhaps that loss making business is seen as a calculated gamble because providers or platforms believe less money will move post 2012. I have always found it difficult to care too much about shareholders’ losing money unless it was so much that they damaged policyholders or the whole system.
But if there is massive client detriment, then it is important these issues are raised. That includes a fair system of competition too.
However, it would be better if Transact could point out the examples specifically. Then the accused would have to defend themselves and we would really have an argument then.
