Authorised Advisors vs. multi-agency intermediaries

From the IFSRA consultation paper:

Categories of intermediaries

This structure [authorised advisors and multi-agency intermediaries] has been in place now for three years, so it is worth considering if it is best for the consumer. When giving your views on this area, please consider if the structure remains appropriate and, if it does not, suggest a more consumer-friendly framework.

You could also suggest ways in which the categories could be made more transparent so that the consumer is aware if their broker checks the full market or provides a restricted service.

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There should be only three categories and they should not allow themselves to be described in any way other than:

Financial Advisor ( a fee based, commission refunding authorised advisor)

Financial Salesperson ( a commission earning representative of one or more companies)

Discount broker ( an execution only representative of one or more companies who will charge you a fixed fee but refund the commission they earn)

The key distinction should be who pays. If the customer pays a fee it is advice; if the institutions pays commission, it is sales.

The existing terminology is legalistic and confuses the ordinary consumer. How do multi-agency intermediaries introduce themsleves at dinner parties?

I am a multi-agency intermediary?
I am a financial advisor/consultant?
I am an insurance broker?
I sell life insurance?
I am a commission salesman?
I am a discount broker?
I am an investment advisor?

I think that the terminology should be standardised and made consumer friendly and absolutely clear.

If I go to a doctor or an accountant or a solicitor, I expect to pay a fee and get the best advice for me. Most people going to insurance brokers expect the same thing, even if the broker is a tied agent or commission based.

Only fee-based advisors should be allowed to use the terms "advisor" "consultant" "broker" or "independent".

It should be clear from their titles that commission paid sales people are effectively trying to sell you something. The simplest would be "financial salesperson". This would cover multi-agency intermediaries, authorised advisors who get paid commission and tied agents.

Brendan

Above

There's a problem with your idealistic view - people won't pay fees at a commercial rate. Any Fee based advisor will tell you that people pay today through a combination of heavily discounted fees and discounted commissions. For example it would variously cost between 1k and 2.5k on average to do a comprehensive review for a mass affluent client. The market won't pay that - it will pay .5k to 1k or a bit more if you're a high market brand like a top 5 accountancy firm. The balance is recovered by commission.

Most fee based advisors use heavily discounted commission products when setting solutions and also use zero commission solutions like geared property, cash deposits etc. Discounted commission is more logical than rebated commission with fee offset. Most mass affluent clients don't want a commission refund -they prefer to see it reinvested within a product and usually are referred by other clients who appreciate the same thing.

Pure fee only advice does exist and is bought but only by the authentically High Net Worth, Ultra High Net Worth, and Corporates. The HNW and UHNW represent 2% or less of the population.

There's little to be gained by prescribing a purist medicine to the mass market if it doesn't want totake it - that's reality, and its universal. Over time more and more people as they become more properous and informed will migrate towards fee based services, but trying to force a purist shape on the market before it wants it is a bit like trying to force Green policy on national government - fine in theory in the simple world of the idealist but doesn't reflect the complex nature of the market.

The existing labels btw are a mess and IFSRA has done nothing substantial to inform the public about the diffrerences.AA's aren't impartial advisors, just more impartial than Multi-Agency Advisors. Cash Handlers are self descriptive, but it says nothing about the type of advice. Ultimately this is a matter for competition to resolve, like through a trade association of fee based advisors - none cuurently exists because the market isn't yet big enough to stimulate the growth of one.

Introductions

The dinner party.

"I'm a doctor".