As part of our new Adviser Insight feature, Neil Martin talks to Alistair Creevy, MD of Independent Advisers (Scotland) Ltd, about the Three Rs: Reform, Regulation and Retirees
Alistair Creevy has seen a few things during his 25 years in the business. A member of both the Personal Finance Society and The Institute of Financial Planning, he qualified as a Certified Financial Planner before launching his own adviser business. And it’s not just RDR that’s put him In a reflective mood: there’s also been the small matter of Scottish Independence.
But more of that anon. Best, we thought, to get straight down to business. So how has life been since the RDR tornado struck? Actually rather well, he says. The switch from commissions to fee-paid advice has been a major success. Indeed, the only negative he expresses is that it was “ten years too late” – and also that a proportion of the population have now been disenfranchised because they cannot or will not afford the fees.
But as an IFA, Creevy welcomes the fact that the focus has moved away from selling products to fulfilling the true role of a financial advisor who has the opportunity to help individuals and families plan their financial futures over a long period of time.
Nowadays, he says, an IFA has to be more a psychologist than a sales person. But therein lies the opportunity to develop long term relationships with clients – which means that IFAs need to listen and fully understand their clients.
The Pensions Opportunity
In particular, he says, there has been a Golden Age cohort of 50s and 60s baby boomers who have never been so prosperous. This generation, he says, has been able to take advantage of valuable pensions and buoyant property prices which have delivered real wealth.
For IFAs, the big opportunity now is that this age group is about to find that its pensions can now be put to good use and not just swallowed up by annuities which often gave poor returns. IFAs will need to be on hand to help this group with their financial planning, he says. And the challenge is to show that they are comfortable within this new role.
Yet, he says, there is still a negative perception of IFAs out there in the mainstream media. Stories of financial scams have blinded people to the fact that people operating within the industry are reaching new levels of professionalism and integrity. And he hopes that the numerous trade associations that represent IFAs will do more to get across the good points of the industry.
Creevy gets right to the point when talking about the FCA. “The problem with the FCA is that the staff are civil servants,” he says. “They don’t understand the IFA sector. They get banking, insurance, and so on, but not IFAs.…So you’ve changed the regulator’s name. Big deal.”
Creevy believes that the industry needs to do more itself to gain a greater understanding from the regulator. Unlike other parts of the financial services industry, he says, IFAs have not been lobbying the FCA effectively, and this needs to change in the future. The industry should also seek greater representation inside the FCA, with a seat on the Board.
The Major Worry
There is no doubt that what angers Creevy and others like him, is the lifetime liability an IFA faces for decisions made and advice given to clients. He believes it’s great that the FCA wants to raise standards – but all regulators look back with 20/20 hindsight, and opinions change from year to year. Unless an IFA sells his firm, or liquidates his business, then that liability will follow them until the grave. And he predicts that, with the slowing down of PPI Claims, there could be a rise in complaints against IFAs as the claims industry searches for a new and profitable target.
He says that the talk of limiting liability to say ten, or even 20 years, needs to be made a reality. Otherwise, the profession faces a constant threat from cases that can reach back years and follow IFAs into deep retirement.
The UK Economy
On the UK economy, he agrees, all pointers are set in the right direction. But a long-running equity bull market, which has effectively been going strong since the 1970s, has possibly raised investor expectations which will now need to be managed. The same goes for the housing market, which over the coming decades cannot be relied upon to create so much wealth.
I thought that Creevy would provide a bland answer to my question about Scottish Independence, but true to form, he was happy to point out that he was against it and that it was becoming the “longest election campaign in history.”
What saddened him most though, was that the endless debates and political in-fighting was polarising friends, business contacts and even families. It was as though Scotland had become obsessed with the issue on a daily basis and the Yes and No factions were point-scoring and grand standing, rather than presenting the real issues about what independence might mean.
He wonders why, at a time when nations are trying to come together within a united Europe (although that is far from successful and needs fixing), many Scottish leaders wanted their country to go it alone and walk away from what has been a very successful partnership with the rest of the UK.
As to which way Scottish people will vote, he said that it would be a close run thing and that my observation that a silent majority would turn around and vote no on the day, was now looking rather threadbare.
Generally, the Golden Age to which Creevy refers is now passing. The children of the baby boomers are not set for such an easy time financially as their parents, he says. And that in turn will put pressure on all advisers within the IFA industry to be at the top of their game.
Yet the overall impression of talking to Creevy is that the industry has entered a new and very rewarding phase in which those IFAs which can adapt to becoming financial consultants, will have a bright future. The Golden Age of the consumer might be passing, but talking to Creevy, you can’t help thinking that the Golden Age of the IFA is upon us.