FSA to scrap Menu & IDD documents

EdInvestor

dunstonh wrote: »

No doubt you are referring to the very few items which are internal charges which can increase the charge above the published amc. Seeing as they are not explicit charges to the consumer, there seems to reason to.

Considering that they often double the size of the amc, I'd say there was every reason to.

Remember that a 1% charge over 25 years will reduce your returns by 25%. Double that to 2% and the damage is 50%.

How bad does it have to get before the regulator thinks the mug punter should know about it?

dunstonh

Considering that they often double the size of the amc, I'd say there was every reason to.

There are a very small number that can be near double. Typically your high cost funds. However, most are only 0.1-0.2% a year more.

The regulations say that explict costs have to be declared but different investment areas are going to incur costs within the investment area they deal with that are charged ad hoc and not possible to put an exact figure on. As these are not charged directly to the individual, you cannot disclose them as an explicit fee.

Remember that a 1% charge over 25 years will reduce your returns by 25%. Double that to 2% and the damage is 50%.

Better to get 15% after charges and 5% with lower. Typically your investments with higher charges are China, Emerging markets and property. All of which have turned in stunning returns.

Dunstonh - its unclear to me as to whether this includes mortgages or is it just an investment class rule?

Well, if its the end of the IDD and Menu, it would effect mortgage, protection and investment.

The menu was useful in providing a clear breach of regulations for an IFA who refused to provide one or reply to questions about for-fee service.

It certainly had a few areas that were useful but it also wasnt flexible enough. For example, I couldnt show NMA charging on there which for me was a major negative.

Compliance_King

Have you perhaps considered that any consumer confusion surrounding the Keyfacts documents may be attributable to the very people presenting them to clients i.e. financial advisers? Keyfacts documents were introduced to exert downward pressure on commission levels and increase the proportion of advice paid for by fee – the only way to remove commission bias and provide truly independent advice. They were also intended to address the need to provide consumers with clear and accessible information about the products and services a firm could or could not provide – in my opinion a positive intention. It is probable that financial advisers have struggled / refused to grasp the intended outcome of the Keyfacts documents for two reasons:
1) Intelligence - the requisite qualifications to provide financial advice are of a comparable standard to those required to be a Holiday Rep – FPC / CF versus GNVQ in Leisure and Tourism. Consequently, advisers struggle with concepts such as ‘to purport to be independent you must offer a pure fee option.’
2) Money - Financial Advisers are first and foremost sales people, why would they embrace an initiative intended to exert downward pressure on their wages thereby depriving their children of food?
…………………….. Also, it’s MiFID, not Mifad.

dunstonh

Have you perhaps considered that any consumer confusion surrounding the Keyfacts documents may be attributable to the very people presenting them to clients i.e. financial advisers?

Quite possibly. However, what benefit were they to the client? They had a few areas of benefit but there wasn't anything covering product charges. Commission is not a good indicator of charges to a client. One IFA can earn £2000 on a product and another earn £1000 with the client paying identical charges. If the one earning £2000, rebates £500 to make the product cheaper, they still earn more commission. The menu would make it appear that the one earning £1000 is the adviser with the cheaper products.

The focus on commission is wrong. Other EU countries don't have this focus. If the FSA want to bring charges down then they should focus on charges disclosure not commission disclosure. When you buy a washing machine, you compare the prices. You do not ask the retailer which one earns them the least commission. Price and charges are key.

Keyfacts documents were introduced to exert downward pressure on commission levels and increase the proportion of advice paid for by fee – the only way to remove commission bias and provide truly independent advice.

To which they failed abysmally.

They were also intended to address the need to provide consumers with clear and accessible information about the products and services a firm could or could not provide – in my opinion a positive intention.

Intention may have been good but the way it was done was highly flawed.

1) Intelligence - the requisite qualifications to provide financial advice are of a comparable standard to those required to be a Holiday Rep – FPC / CF versus GNVQ in Leisure and Tourism. Consequently, advisers struggle with concepts such as ‘to purport to be independent you must offer a pure fee option.’
2) Money - Financial Advisers are first and foremost sales people, why would they embrace an initiative intended to exert downward pressure on their wages thereby depriving their children of food?

Ever heard the old saying that those that work in compliance aren't mostly failed advisers or those that couldn't hack it giving advice? So, on your scale, that makes the compliance officers the toilet cleaners on the holiday camp.

I act as a consultant to another IFA firm on investment business and they were having issues with their compliance department telling them that investment bonds were better than unit trusts for basic rate taxpayers, CAT standard still existed and non-tax payers could still claim back tax on equity unit trusts. So, do excuse me if I am a little negative towards compliance individuals who make out they are better than others.

…………………….. Also, it’s MiFID, not Mifad.

Correcting spelling mistakes it poor netiquette. Especially as it was a spelling checker that changed it from Mifid to mifad.

Violet_Isle

Compliance_King wrote: »

:
1) Intelligence - the requisite qualifications to provide financial advice are of a comparable standard to those required to be a Holiday Rep – FPC / CF versus GNVQ in Leisure and Tourism. Consequently, advisers struggle with concepts such as ‘to purport to be independent you must offer a pure fee option.’
2) Money - Financial Advisers are first and foremost sales people, why would they embrace an initiative intended to exert downward pressure on their wages thereby depriving their children of food?
…………………….. Also, it’s MiFID, not Mifad.

Just a bit of a generalisation there then.

HelpWhereIcan

dunstonh wrote: »

Ever heard the old saying that those that work in compliance arent mostly failed advisers or those that couldnt hack it giving advice? So, on your scale, that makes the compliance officers the toilet cleaners on the holiday camp.

Most compliance officers I have come accross have been 'failed' advisers so generally have no better education than advisers (with the exception of BMU eh dunstonh ).

Now the FSA, there's a different matter - they employ mainly graduates who have no practical experience of personal finance but yet have the same attitude to the people at the sharp end as that shown by "Compliance King" (:rotfl: ).

Funnily enough, they tend to be the people who bring out IDDs etc and who are now being touted around adviser firms so that they can come and spend some time with us to see what the reality of the role and interaction with customers is.:rolleyes:

dunstonh wrote: »

Correctly spelling mistakes it poor netiquette.

And not having sat in front of a real client trying to explain the difference between independent and whole of market makes you think it should be obvious to everyone and blame advisers when the public (Martin included) think the way the FSA have done things is less than clear and transparent.

For what it's worth, I think the IDD is a good thing and will probably continue to use one after 1/11 as 'best practice' - but then again, the fact that I am one of the few advisers (If Compliance King - arrogant as they are - is to be believed) who has A' Levels and a degree might mean I am one of the few who 'Compliance King' thinks worthy of explaining things to people.

Funnily enough, I also worked as a holiday rep after Uni - maybe Compliance King has hit upon the ideal recruitment ground for graduates who are good at dealing with people!!!!!