Market Comment 1st Mar 2010 PDF Print E-mail
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Written by TrigoldCrystal Marketing Manager   
Friday, 05 March 2010 00:00
Hasn’t it been nice to get a little sun this week? With things looking a little better outside and more good news stories to make us feel more hopeful for the future, it is easy to forget that our industry faces some very serious issues at the moment. Not to bring anyone down, we just thought that it would be interesting to think a little about something which should have financial advisors everywhere up in arms – we have had dual pricing for a while now but what about dual regulation or what might be called shocking prejudice by financial regulators towards IFAs and mortgage brokers in favour of banks? A little analysis shows this to be something to be quite concerned about.

In a recent article in Money Marketing by Which? Chief executive Peter Vickary-Smith explained what their banking enquiry in conjunction with a number of MPs would set out to do. In his article, Mr Vickary-Smith makes the following points:
  • Consumers don’t generally want to be sold to
  • Consumers need quality independent advice
  • Commission in the form of procuration fees is a source of bias
  • Single and Multi-tied advisors have been shown (in Which? mystery-shopping surveys) to give lower quality advice
  • It needs to be made completely clear when a consumer is being sold to and when they are being advised.
Let’s ask how this operates in the real world:

1) Which type of organisation generally 'sell' products than give independent advice?

2) In an environment where consumers need quality independent advice, which sector of the market is being most heaviliy penalised by regulation?

3) Where is the evidence that proc fees create product bias except in huge investment banks where commission and bonuses created a risk taking culture? Is this comparing like with like?

4) If quality independent advice is needed at the point when consumers ‘decide they need a new financial product’, what happens when consumers are put off by fees and then do not get advice on suitable products that they didn’t even know existed?

5) A procuration fee is paid when a client walks away happy with a product. What happens when they pay a fee up front and therefore feel a disincentive to shop around if they are unsatisfied with the advice they are being given?

6) Why is there no discussion of banks charging fees for ‘advice’ and removing commission and bonuses in a sector tied and multi-tied which have been shown by Which? to score lower in satisfaction surveys than whole of market advisors?

The debate here seems skewed in favour of the kind of advice given by banks. We have already seen dual pricing, are we now going to see dual standards when it comes to regulation?
Last Updated on Monday, 12 April 2010 09:08