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Friday, 27 May 2011

Pesto has spotted it!


At this link you will find David Peston's take on the fact that unscrupulous IFAs or insurance companies may seek to hoodwink employers into joining expensive old style pension arrangements - especially whilst tasty residual commissions are still allowed (things change very slowly with the FSA and the Retail Distribution Review).

Unfortunately we can't wait for the Government to 'clamp down' at the first sign of mis-selling. By then it will be too late....we need strong warnings to the industry that they have to advise on what is likely to be best for the employees - i.e. focus on charges, fees and potential outcomes - not on what pays best to the adviser.

See this from Money Marketing!!!


"When I speak to our partner firms and the wider adviser community these days, I am getting a real sense from just about all of them that this is a really great time to be an IFA. Or rather that this is a great time to be a “high quality” IFA.

There are a number of things driving this positive feeling at the top end of the adviser market but the key one for me is the realisation that this much-talked about power shift from providers to advisers is not only happening but is happening at pace.

This is great news for the adviser market. It means the foundations are being set for a golden period for truly independent advisers, where they will not only get credit for the great work they do but will also be able to achieve the sorts of business valuation once only reserved for product providers.

RDR is helping to move things along, there is no question about that. Importantly, it is also helping rid the sector of many of the weaker IFA firms, which I think is a good thing. But to be honest, many of the more forward-thinking adviser firms I work with were on this path well before anyone had ever heard of the RDR. They, like me, had a sense of where things needed to head and were insightful enough to start the journey themselves.

Technology, particularly platforms, has been instrumental in helping many adviser firms. The importance of platforms is now well recognised and an IFA’s choice as to which one, or ones, they use is arguably one of the most important business decisions they will ever make. The right platform can not only drive up efficiency and keep down costs but as Hargreaves Lansdown and Cavanagh have demonstrated in the wealth management space, it can form the centrepiece of a client-focused and extremely profitable business that has real value.

Key to creating that value is advisers getting paid what they are worth. On a typical TER (total expense ratio) of 2 per cent, IFAs historically only see around 0.5 per cent of this Providers and fund managers get the remaining 1.5 per cent. I believe advisers should be getting around 1 per cent and it is something we are working hard with our members to achieve. We are already there with most of them.

While all this is going on, there are also opportunities for IFAs in the as yet untapped corporate space. Again technology, in the form of platforms, will play a crucial role.

The changes we are seeing in the industry are ones many of us have been campaigning for for some time or at very least were expecting. Has there ever been a better time to be a high-quality IFA? I am thinking not."

Paul Hogarth is founder of Paradigm Partners (pensions partner: Steve Bee)

My comment:

*** So if they manage 8% a year on a fund – 2% (or 25% of the overall return) is swallowed up in charges and commission! And if they manage 0% or minus 8%, then they still get 2% of all your investment, split between the IFA and investment provider! Is this treating your customer fairly ??!? ***

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