Nic Cicutti’s recent article in Money Marketing saw him launch attacks on Libertatem and Pimfa. But is he right – or is it more personal than that?
Generally, I avoid reading Nic Cicutti’s contributions. I have low blood pressure and I like to keep it that way. But last week, he embarked on a personal attack on me and my organisation, Libertatem, so I thought it prudent to respond.
Firstly, I would like to lay down some background on my relationship with Mr Cicutti.
Nic and I go back a long way. Although we haven’t met in years, we have had many a beer in the past and he was certainly a supporter of my efforts back in the early days of the IFA Association. Indeed, he even contributed articles to a magazine produced by the Association.
The decision to drop him came back to haunt me personally when I launched Libertatem. The organisation came about because there was a general feeling amongst the adviser community that their needs were not being met by Apfa, which was being driven by large networks with strong links to the regulator.
Nearly 50 per cent of the adviser community claimed they would join me, yet Nic immediately dismissed my efforts as being that of a “tribute band, attempting to bring back the past”. He has been on my case pretty much ever since.
I have nothing against him personally. But he has the same mind set as most metropolitan progressives. He does not believe that any commercial activity can be moral or trusted, and must be conducted under the watchful eye of a huge phalanx of regulators. In this he reflects the views of our political and regulatory elite in general, and the Financial Ombudsman Service in particular.
He may have a point about the large institutions, but they have both the lobbying power to mitigate and the staff to handle the regulatory pressures. Across Europe the banks and insurance companies spend €300m (£261) on lobbying every year. European advisers are hard pressed to raise €2m.
The reason for this is simple: despite being in one of the most politicised and regulated occupations in Europe, advice firms generally avoid joining trade associations.
In the UK, 80 per cent of firms don’t contribute and, more importantly, never have. Over the years I have heard all of the excuses, from being over-complicated to having too many options and not knowing which one to side with (there were five trade associations in existence when I started with NFIFA in 1989, all of which represented advisers as a minority interest). The reasons not to join seemed to outweigh all other options.
Our solution was to create an adviser-only body. We then set about merging with and taking over all of the other associations until there was only one choice. But now the excuse was that there was no choice.
Today, of course, advisers have a choice of two: Libertatem or Pimfa, both of which Nic has just dismissed as being irrelevant.
I’m not sure what research Nic carried out in coming to this damning conclusion. He certainly never spoke to us. Had he picked up the phone I would happily have informed him that we have been co-ordinating the activity around the Connaught fund, which is the best example yet of regulatory inaction and an Ombudsman determined to dump responsibility on advisers rather than those responsible for running the fund.
Our efforts have already seen Capita return 100 per cent of the capital invested in the fund to investors which has saved each and every adviser £4,500 simply because it hasn’t been taken out of the bottomless pot that is the Financial Services Compensation Scheme. We are now concentrating on trying to return those advisers affected to their original position as well.
Meanwhile, in our Financial Advice Market Review discussions with the FCA, Libertatem focused on regulatory and FSCS costs. The UK professional advice sector represents only 1.1 in 1,000 of FOS’s cases and yet each of those cases shares over £76,000 of regulatory fees – a huge cost for a very small problem. Advisers are also exposed to a potential £400m each year from their share of their two FSCS pots.
As a result of lobbying by both Libertatem and Pimfa, 25 per cent of that cost will now be funded by the providers – a potential saving of £100m a year.
And then there is The Heath Report 3. Nic describes it as “a report that nobody cares about”. And yet the industry response to it has been very positive, the underlying trends have been picked up on and a number of industry leaders have requested meetings to discuss further. Put simply, Nic is wrong.
In a Trump era where fake news is in itself a headline, to have lazy journalists asserting their views without even picking up the phone to verify their position is dangerous. To simply dismiss two trade associations as being irrelevant because they don’t fit into his view of the financial world simply isn’t good enough.
Libertatem and Pimfa exist to make the world a better place for those they represent. Without us, the regulators can do what they want, which appears to be fast tracking the demise of the impartial advice sector.
Nic closes his article by asserting that Pimfa is doomed to become as irrelevant tomorrow as I am today. He may well be right. With 80 per cent of the adviser community happy to freeload on Libertatem’s and Pimfa’s membership, it will always be an uphill struggle. We estimate that £3m is required per annum to cover all bases. At present, we believe that between us, we are raising less than a third of that figure through membership and sponsorship. With Pimfa’s loyalties split between advisers and wealth managers, even less of that figure is going towards fighting the IFAs’s corner.
So should we just pack up our files and go home? At my age, and having done it all before, it certainly makes sense. But with a vibrant and passionate membership behind me, and no successor in the wings to carry on the work, it’s simply not an option.
I would suggest that perhaps it is Nic Cicutti that needs a cause to believe in and fight for. Constructive criticism is welcome so why not delve deeper into the underlying problems of the regulatory system, the sector and the trade associations? Because if he is right, and the industry has indeed passed us all by, then he may well find himself with nothing left to report on.
Garry Heath is director general at Libertatem