As deputy director general of Aifa, there is no one more in touch with IFAs than Fay Goddard . She tells Johanna Gornitzki exactly what needs to be done to reign the adviser community in.
After nearly a decade spent working for a trade body, you would not blame Fay Goddard if she felt somewhat jaded about her job. The reality, however, is that she still thoroughly enjoys it and says that "there is no such a thing as an average day". Saying that, she smiles: "I spend an awful lot of time at Canary Wharf talking to the Financial Services Authority (FSA)".
In her early days, Goddard worked in the pensions department for Norwich Union but after a career break she did not come back to the financial services industry until 1990 when she helped a friend, who was an IFA, to sort out their family business.
While her initial plan was to stay on only for a few months, Goddard soon became absorbed in the business and ended up staying with the firm while qualifying as an IFA. But it was not until she moved on to a larger company, where she was responsible for getting all the IFAs to work together, that she became interested in the policy side of things. "I thought if I could do this for one firm then why not try doing it for the entire IFA community?" she says.
So in 1997, Goddard joined the then-trade body IFA Association and after the Association of IFAs (Aifa) was set up in 1999 she was simply brought across. Being the deputy director general of Aifa, Goddard says the organisation has two ways of dealing with the workload; one that is proactive, the other reactive.
"We have a proactive agenda of work that we want to do, but we also spend a lot of time liaising with various trade bodies, the Government and the FSA to discuss issues before they come to consultation stage and that is really important."
She adds: "There are things that are discussed that are then thrown out and would never see the light of the day and that is because we put in an argument saying 'this is not workable'."
Goddard sometimes feels rather frustrated about the lack of understanding IFAs have about the important role Aifa plays as a trade body. "The wider community seems to think that we have hundreds of people here, but we only have 16 staff and around 40,000 to 50,000 advisers that we are communicating with. We also have a very broad remit as we don't just focus on investment advisers or general insurance advisers but we have to cover the whole market."
Looking at the role of the IFA, Goddard believes it has changed "tremendously" over the past decade. "We have come along leaps and bounds since the early days of the 90s. There have been massive improvements, certainly in competence and standards and, while we may still have some way to go, we are getting there," she says.
For example, there has been some reluctance among IFAs to tell their clients what areas they specialise in, says Goddard, adding that she would much rather see firms saying 'look that is not an area that we specialise in but we can refer you to someone who does' than trying to offer advice on something they are not too familiar with.
She also thinks advisers need to sell themselves better. "They undervalue themselves hugely. If you want to be a professional you have to value the work you do and value the expertise that you have. So don't undersell yourself and don't underestimate what you do," she says.
Goddard hopes the Thoresen Review on offering generic advice, with the interim report out by the end of the year, will help make people more aware of the important role advisers' play. "A lot of the work IFAs are doing today is actually educating people before they can advise them as the level of knowledge is so low. It is far easier to advise people that are financially literate," she says.
Striking the right balance
"My only fear is if it became a fast-track way for product selling. I want a clear bit of water between an independent and totally partial generic advice service. Otherwise you would just undermine that advice service if it is seen as a way of pushing people through one door and then out of another. That would be a grave mistake and it could dent the confidence of the public," she adds.
Apart from the Thoresen Review, another big development on the horizon is the Retail Distribution Review (RDR). Many people seem to be focusing on the commission part of the RDR, but the review is far bigger than that, argues Goddard. Having said that, she adds that, in Aifa's view, "there is no problem with commission at all".
"Commission is not just the route to evil, but it is still the preferred method of payment by consumers. It is the abuse of commission or commission being used as a main driver to drive business that is the problem," she says.
Talking about the RDR overall, she says that "some of the basis of the review is, in our view, seriously flawed". Concerned, Goddard says it is essential that whatever comes out of this review is something that is better and not just different. "There are some good proposals in there, and then there are some strange proposals and then even some blatantly commercial proposals, which are not necessarily good for consumers."
Apart from conducting lots of work on the RDR, Aifa is also keeping itself busy by preparing for the implementation of NEWcob in November as well as preparing its response to the Insurance Conduct of Business (ICOB) review.
In the latter, the FSA is proposing to split up general insurance into two risk categories, with protection products like critical illness and income protection likely to be in the higher-risk category. The only areas still open for debate are whether private medical insurance (PMI) should be in the higher-risk category and term assurance in the lower risk one, says Goddard. "There are no doubt some who would like to see term assurance classed as low risk, but I would be surprised and disappointed if this happens."
She adds that Aifa will be "pushing hard for PMI to be classed as higher risk along with all other protection products".
Besides this, the FSA is still banging the drum about Treating Customers Fairly (TCF), Goddard says, and the industry has a March deadline to make sure firms have their systems in place. She says: "For large companies, this is not too difficult, but for a small firm it is very hard. When you say to a small two-man band 'what evidence have you got that you are adhering to TCF?' you're going to get a glazed look and that is hardly surprising. We need to be able to talk to IFAs in a language that they understand. And while having satisfied clients doesn't necessarily mean you're treating the clients fairly, to an IFA it does."
Real and perceived threats
Looking to the future, Goddard thinks European legislation is one of the biggest threats to retaining the UK financial services market – not the FSA. "This is where most of our battles will take place in five years' time."
As for Goddard herself, she is looking forward to continuing to work for Aifa for at least another five years, adding that her ambition is to see a strong professional independent channel for advice. But it will be tough she admits, saying she is currently facing her greatest challenge yet. "The RDR is the biggest challenge in my career at Aifa and the changes we faced when we went through depolarisation pales into insignificance compared to what we are facing today," she concludes. n
