The world of financial adviser trade associations is currently in a state of flux.
On the one hand, we have seen disaffection with the AIFA ‘caused’ by competing interests of those who will offer fully independent advice and those who will not.
On the other hand, the comments from Wayne Pontin, the new chairman of AMII, about potential deepening relations with Biba, and the fact that Biba itself merged with the IIB last year, shows that people can join together when they see shared interests. If the answer is simply ever-greater fragmentation into niche trade associations, then we have asked the wrong question.
It is true that the flux seems to have been exacerbated by the RDR and the prospects of significant changes in the financial advice market as it moves from commission to fees in investment advice, and regulation on what is independent advice and what is not.
Some companies offering advice that crosses beyond investment will separate their pricing into the two vehicles. Others may move entirely to fees. Then we have yet to see what fees clients will support as the market becomes fully competitive in the new world.
Many years ago, property conveyancing moved from fees based on a percentage of the value of the property to the competitive costs of the work done. In that case, there was a period of transition that lasted several years.
But, however important regulatory changes may be, they will always be with us. Indeed, I believe the greater the challenges facing the industry, the more important it is to establish what common interests there are and to lobby for them. If there are differences of interests, these should not be allowed to cloud common goals.
The AIFA attempted to become the voice of the financial adviser profession and to represent the interests of all (whether independent IFA or not). But for some this proved too far a move from its roots. So what is the way forward? The centralist solution is to merge organisations together to create an ever-greater and more influential force.
It has some merits: ultimately you could end up with an ‘ABI’ for financial advisers. It can be argued that a lone IFA has little in common with the giant brokers. But the same could be said for a small insurance company such as WPA or Aviva.
However, sometimes this approach leads to a merger too far where interests are so far apart that the relationship is artificial. Take the creation, through a series of mergers, of the Care Quality Commission, which regulates all health and social care providers, from small private nursing homes to large NHS foundation trusts. The organisation lost its direction.
The other approach is to embrace diversity by having an umbrella organisation to which niche trade associations subscribe to and govern, and which represents only the common interests of all of them.
This route is very common in the charitable sector. The Genetics Interest Group, for example, is the umbrella organisation for a large number of independent charities which continue to represent the special interests of their own client groups.
The merger approach is fine for those interest groups who see deep common ground, but will not work across the board in this industry, even in the medium term. The umbrella approach should be given serious consideration: the current flux is not in anybody’s interests. Maybe the AIFA should be a member of that umbrella for IFAs and there should be another body for the non-independents, again subscribing to the umbrella.
Richard Walsh is a director and fellow of SAMI Consulting
www.samiconsulting.co.uk
