FSA to probe IFA advice problem

EdInvestor

It seems that many people are having problems getting advice on what to do with their With-profits investments like endowments, pensions and WP bonds.

This could be because

#The IFAs don't understand With-profits products and can't work out if people should stay or leave
#They are embarrassed that the products they sold have done so badly
#They don't want to be accused of "churning" (encouraging someone to give up one product and buy a new one on which the IFA earns more commission)

Telegraph report

payless

I can see why some IFAs might not want to comment about products sold by other advisers, especially if they are not charging a fee

dunstonh

Here we go again. Ed posting another anti IFA thread. Interesting spin you put on an article that doesn't blame IFAs but you do. There ought to be a warning on your posts to highlight your position and why you are so anti IFAs. I don't hide from my IFA tag. Perhaps you shouldnt hide from your "tag" Maggie.

#The IFAs don't understand With-profits products and can't work out if people should stay or leave

Didn't see that mentioned in the article.

#They are embarrassed that the products they sold have done so badly

Some are. However, not all with profits funds are doing badly. I have a number of clients whose current balance is in excess of 10% p.a. net. You cannot have the assumption all with profits funds are bad.

#They don't want to be accused of "churning" (encouraging someone to give up one product and buy a new one on which the IFA earns more commission)

Didn't see that in the article either. It said the FSA was looking to see if that was a reason. It didnt say that it was a reason.

Taking some quotes from the article....

The Financial Services Authority has raised concerns that most financial advisers are ill-equipped to advise clients on whether to bail out of with-profits funds or to stay put.

It doesn't say they cannot understand the products as Ed suggests. It says they are ill-equipped. I totally understand that because it is so hard to get With Profits information out of some companies. Many companies just ignore requests or send you very basic information. When giving advice, you have to keep research on your file to back up that advice. If the exisiting with profits provider refuses to give you information and you cannot get that information elsewhere, you are then in the territory of giving advice based on what you believe may be the case. If you are right, no-one complains. If you get it wrong, people complain. Some advisors are not willing to take that chance without having the facts to support it.

Ned Cazalet does a lot of reporting on the funds but even he cant get enough information from the providers at times to make his reports. Plus, as an IFA, if you want his reports, it can cost you thousands of pounds. How many IFAs have the resources to buy those to advice perhaps one or two clients? You cannot share the reports either as they are copyright and bought on a one per IFA company basis.

Although there are some pretty poor with profits funds out there, some of them are turning round and over the long term, they will return to their 6-7% p.a. average. That is already noticeable.

EdInvestor

You are soooo defensive DH, it is amazing. :eek:

This is not meant to be anti IFA, it's just factual.


The comment about churning is from Strachan at the FSA in the first para.

Cazalet says in the article

"You have IFAs who are embarrassed that plans they sold their clients five years ago have turned out to be a poor investment, but are reluctant to tell them how bad it has been."

And

"On top of that is the complexity of the products - the value of guarantees, the complex mathematics behind the way these schemes pay out and the effect of charges.

Don't you think that means the IFAs are having trouble understanding the complexity of With profits? Haven't I said many times even the actuaries have trouble with this, not to mention the FSA?

This article is of interest to MSE endowment readers IMHO because it explains why it's so difficult to get a straight answer out of advisers (including non IFAs ) on this matter of what to do about their policy.

There's no point in attacking me over what should be a matter of concern in your industry,since there is 385 billion quid invested in these products.

It just won't do to ignore the problem, will it?I'm glad to see the FSA is on the case.

dunstonh

I'm only defensive at the way you turn things against IFAs in particular in so many of the posts you make. Every post I make shows that I am an IFA. So people can see what side of the fence I sit on. Not many here know your background and what your agenda is.

The article highlighted an issue which does need addressing. However, you then turned it against IFAs rather than the real source of the problem which is companies not supplying the information required by IFAs.

Don't you think that means the IFAs are having trouble understanding the complexity of With profits? Haven't I said many times even the actuaries have trouble with this, not to mention the FSA?

For some, yes. You don't expect a GP to perform a heart bypass and you shouldnt expect every IFA to understand it either. However, the information isnt that had to work out as long as you are supplied with the data.

EdInvestor

dunstonh wrote:

I'm only defensive at the way you turn things against IFAs in particular in so many of the posts you make. Every post I make shows that I am an IFA. So people can see what side of the fence I sit on. Not many here know your background and what your agenda is.

Rubbish.All they have to do is click on my username and then on my homepage to see who I am. And your name is.......?

The article highlighted an issue which does need addressing. However, you then turned it against IFAs rather than the real source of the problem which is companies not supplying the information required by IFAs.

That's not what the FSA says they don't mention a problem with the insurance companies.

stanmoresaver

EdInvestor wrote:

Rubbish.All they have to do is click on my username and then on my homepage to see who I am.

Am i being thick- where does it say who you are?

dunstonh

That's not what the FSA says they don't mention a problem with the insurance companies.

They dont say that there is a problem with IFAs either.

David Strachan, the FSA's head of insurance, said: "There is a concern that there aren't that many IFAs out there well-equipped to advise on whether policyholders should stay with or leave with-profits funds.

It is saying that many IFAs are not equipped to advise. That is correct. If you cannot justify the thousands of pounds to buy a cazalet report and the provider doesn't give you the information or you cannot obtain it from other sources, then you are ill equipped to give advice. In which case, you are more likely to not give the advice as advice comes with a lifetime liability.

ReportInvestor

This thread is not dh's finest hour

The more I read the more I find him agreeing with Ed on the key facts but somehow disagreeing for whatever other reason .

dunstonh wrote:

They dont say that there is a problem with IFAs either.

It is saying that many IFAs are not equipped to advise.

For instance. Square the dh circle on that if you can.

Another tactic is bringing in assumptions not in the thread in order to disagree with them - a classic Blair debating ruse.

dunstonh wrote:

You cannot have the assumption all with profits funds are bad.

Ed's original post did not say that, nor was it the basis for the Telegraph article that is at the heart of Ed's point.

dunstonh

When Ed starts concentrating on helping others rather than fulfilling her sole aim of attacking IFAs, then I will ease up on correcting her very many mistakes. Reportinvestor, you are very similar but seeing as you both originate from the same place, it is no surprise you are like tweedle dum and tweedle dee.

Ed presented the article which I think is very fair and accurate. However, she chose to add a summary which was inaccurate and not reflected in the article. Giving it her own Blair-ish spin which we too often see on these forums.

Ed said:

The IFAs don't understand With-profits products and can't work out if people should stay or leave

The article does not say that. It says IFAs are not always well-equipped to give the advice that is needed and that is what is being looked into. It did not say IFAs dont have a clue about the product. The product is quite straightforward. Its the data behind the scenes that is far more complicated. Especially when you cant get access to it.

They are embarrassed that the products they sold have done so badly

Many quite probably are now. Not just IFAs though. With Profits have been round for 150 years providing the backbone of savings & investments all that time. Then in a very short period, due to a combination of events, some with profits funds have failed to deliver. Often is not the fund that has failed but the product it is wrapped in. If the providers couldnt see what was happening in advance and the regulator couldnt, then how are you expecting IFAs to? Advice needs research and data. If no data is coming through to counter what is considered normal, then it will continue. Hindsight is a wonderful thing. Up until 2001, you wouldnt have found anyone unhappy with their with profits fund. With bonuses increasing again, MVRs beginning to go and returns looking healthy on post crash investments. It isnt all bad news.

I have to be honest, it gets very frustrating to log in to the forums each day and find another post from Ed slagging off IFAs or suggesting inappropriate products or giving outright inaccurate information. The IFAs of the board then spend time correcting it only for you or one or two others trying to turn the whole thread into "attack the IFA" . When factual information is presented to highlight your errors, this gets ignored totally and you try and pick holes elsewhere. Too man advisors have given up posting on the board because of the continued attacks against them or their profession. Advisors that are giving their time and information for free.

ReportInvestor

dunstonh wrote:

The product is quite straightforward. Its the data behind the scenes that is far more complicated.

Another dh classic on With Profits .

dunstonh wrote:

When Ed starts concentrating on helping others rather than fulfilling her sole aim of attacking IFAs....

:rotfl:

What a paranoid misrepresentation.