The Personal Finance Society's newly appointed chief executive, Tim Eadon , talks to Johanna Gornitzki about the challenges facing IFAs and how it aims to help them
Created following the merger of the Life Insurance Association and the Society of Financial Advisers in January 2005, the Personal Finance Society (PFS) is now in its second year. But with so many trade bodies already established in the UK, is the new organisation filling a true gap or is it simply adding to what is already on offer?
Passionate
The society's CEO, Tim Eadon, is passionate about the PFS and is adamant that it is an essential addition to the marketplace. He explains: "It is a bit tricky being a new trade body. However, we have managed to establish our own identity. We hold a different banner than, for example, the Association of IFAs, which represents its members and would not naturally look at engaging with consumers or members of the public – and that is what we are doing."
Eadon, who was appointed CEO of the PFS in June, has not always worked in the financial services industry. Originally qualifying as a maths and PE teacher, his previous career included running his own company and managing a number of leisure facilities in the UK, as well as holding various roles at Norwich Union Life (formerly Commercial Union). He also has extensive knowledge of the IFA market, having spent three years leading Sesame's advice division. It is experience that has proven useful in his current role.
The PFS offers everything from technical seminars to conferences helping financial advisers find new careers. Eadon says it also spends a lot of time talking to regulators and other professional bodies to try to shape the direction of the financial advice community. He explains: "Our key objective is to raise the reputation and the profile of financial advice in the UK because we have very good quality and experienced individuals that work in it."
But to achieve this goal, says Eadon, the organisation needs more members. It currently represents 22,500 advisers, which makes it the largest professional body of its kind in the UK. He argues, however, that it is important to attract more members because then it can be more representative of the needs of the financial advice community as a whole.
That said, the PFS is already having an impact on the industry. For example, witness the Association of British Insurers' (ABI) updated Statement of Best Practice for critical illness insurance. Last year, the PFS organised a meeting, where people from all corners of the insurance industry discussed the proposals set out by the ABI and pinpointed what they thought was wrong with them.
Eadon thinks that the ABI took notice of the issues raised. He says: "I think it did take on the criticism we put forward and they said that it has been very grateful for us pointing it out."
The PFS aims to build on this initial success, says Eadon, organising similar consultations in the future. He adds: "I think there is a call for a professional body to set out guidance and it should be done more."
To show that it is committed to the task, the PFS has organised a summit in November with the main distributors in the UK and representatives from the IFA community. "We will look at the key issues that affect financial advice professionals and try to bring all that information together so, collectively, we can think forward and address the major issues that are there for us," says Eadon.
He thinks there are two main issues that advisers have to address: how to interpret the Financial Services Authority's (FSA) softer stance to regulation; and how they can take their business model forward.
While applauding the FSA for taking a lighter approach to regulation, Eadon warns that IFAs may struggle to understand what is expected of them.
He says: "The FSA has gone from tight regulation, when most people thought they understood what they had to do, to this lighter-touch regulation, and now it is down to people to interpret what the rules mean. The thing is, it is no good the FSA weaving this into the marketplace and hoping that it will all fall into place. You need to gain an understanding and be able to interpret it. We think it is our place to try to interpret what it means for the profession and be able to give some proper guidance to advisers."
Another difficulty with which IFAs are struggling is their business model, in particular the remuneration options on offer.
Eadon explains: "The huge difficulty we have at the moment is that the commission world doesn't apply for the longer term. While most advisers know what their business model needs to look like, some 80% to 90% still have not done that much about it. Many fear going back to clients and asking them to pay fees. And they also lack the confidence to ask that question."
He adds that advisers should not be too concerned about switching from commission to fees: "Interestingly, we have example after example of our own advisers that have gone down that route and the majority have been very successful when doing so."
Unlike many other industry commentators, Eadon does not think firms selling financial products on a non-advice basis will pose a threat to advisers. "I think it plays nicely into the hands of financial advisers, because with more firms like supermarkets and websites offering policies, there will be so much choice that it will increase the need for advice," he says.
Bottom line
However, the bottom line is how to make sure consumers are aware that they need advice. To get the message across, Eadon thinks that there is a need for a Government initiative, something he is trying to address. The best way, he says, would be to put financial planning on the school curriculum.
He explains: "One of the most important things you could ever learn at school – that affects almost everybody – is how to deal with financial matters. Most people have a mortgage, most people have a loan, most people have credit cards – and yet this area is grossly underplayed in the education process."
Looking forward, Eadon thinks the sector will be rather different in five years' time. He says: "I think there will be fewer players in the market and I also think there needs to be, both from a consumer and a regulatory perspective. I wouldn't say we will merge with anyone. But there are always possibilities in the future – I would never say never."
He also thinks that the financial advice profession could look different as well. "There will be fewer advisers than there are now but, at the same time, there will be far more specialist advisers."
But Eadon argues that advisers – in some shape or form – will always be needed: "People will always need financial advice. And helping them to understand that is our challenge."
