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Independent Financial Advisers and Resolution
by James Pirrie FLIP and Karen Ritchie FPW
James Pirrie writes:
Seven years ago, I started doing IFA exams. After hours and hours in the middle of the night, apparently, I got to about the level of 50 metres freestyle badge: nothing to write home about and certainly “short” of my target of G60, (the equivalent of the cross channel swim) …. still there is always next year (or would be if they hadn’t changed the syllabus).
Ever since then (and for some time before) it has struck me as bizarre that we deal so much with products about which we know so little. Any halfway decent IFA would probably know instantly what tax relief there is available for maintenance payments*, what sort of term policy could have a value, or what the financial limits on a share incentive plan might be. Outside the small handful of revolting swots [definitely not me, mate, forgot the lot as soon as the ink was dry on the pass certificate], I am not sure that the same could be said of us.
Even so, I chuckled with the best of them, about the “full-team model” proposed in America for collaborative work … with a child specialist worrying about the children; the coaches managing the relationship, the inter-relations and recovery; and the financial neutral doing his/her bit, just what were the lawyers providing for their few hundred an hour burn rate ?
However, bit by bit, I have come to start to use financial neutrals [no, not yet the full-team model] and the more I do, the more that I realise:
- That the financial neutral does indeed cut through the figures.
- That this creates data faster and cheaper … and, more significantly, it produces neutral data, which is far easier for clients to come to terms with.
- It may generate options [and will certainly ensure earlier recognition of some of the tax and implementation pitfalls] that we would never manage on our own; and
- Yes, it releases the lawyers to do what we were supposed to do, which is manage the clients to build towards the deal – and that is a full-time job just on its own.
So what Karen Ritchie is building in her quiet but scarily efficient way is not just some side-show, interesting to a minority few. I think that we are looking at the shape of the future. We should all get on board to understand and start to think more about its potential to enable us to deliver, with greater efficiency, better deals for clients.
Karen Ritchie writes:
I suppose that it is the errors that you remember and which therefore formed in my mind the clear impression that experienced IFAs could add so much to the work being carried out by divorce lawyers. Since becoming involved,
I am more aware of the excellence of much of the work being carried out, but, getting closer to the “stuff” with which lawyers are dealing every day, I am even more convinced that my profession has value to add, particularly in the middle range of cases, where there are a variety of financial products, which need to be re-evaluated in the light of the changed needs arising from the separation. Not to mention the financial education and budgeting needs of one or both spouses.
I have also got closer to some of the horror stories that have populated some lawyers’ experiences of my profession. There is a lot for us to learn from each other, if we are to avoid a relationship based on cliché and urban myth and so I have approached the current task with a high degree of seriousness.
From the outset, I have known that for IFAs to be useful to lawyers, they will need to have a far greater understanding of what it is that you do – what worried me was that training for IFAs in divorce work significantly failed to equip them for the demands placed upon them by lawyers. If we were to become useful to you, it was only by “on the job” experience and little wonder that there were some side trips along the way.
Clearly what was going to be required was far greater understanding of what divorce lawyers do and why.
It was apparent that neither the FSA, nor our qualification provider, the Chartered Insurance Institute, were going to move effectively and quickly to address this need … but what we could do was:
- Create a register at Resolution for IFAs.
- Create training and an exam to ensure the quality of those on the register. The training is run by IFAs with substantial experience in divorce cases and involves Resolution lawyers sharing their insight to divorce work, all of this aims to get IFAs to the right standard of knowledge.
The training that we have created is focused specifically to meet the requirements of the collaborative model of work, because that is where the demand for effective IFAs is most acute. However, we are also certain that it will enable IFAs to provide a more effective service in cases which are being dealt with traditionally. The assistance that we provide in collaborative cases is actually not so far from the ethos of the assistance that we would provide in traditional cases and might well be identical in mediation cases.
The registers
Ultimately there will be two registers accessible to both lawyers and the public via the Resolution website.
- Register One: for IFAs who have undertaken a two day technical training followed by an open book exam with a pass mark of 90%.
- Register Two: for those IFAs from Register One who also undertake essential (basic) skills training for collaborative work.
However, before IFAs even get to the technical course, they have to comply with strict entry criteria:
- Three years post qualification experience.
- Must be independent with a fee option.
- Must hold G60 or equivalent to meet FSA client protection rules when working with pensions.
By entering IFAs on the register, Resolution would be confirming the above, which, after a lot of consultation and careful work, is in the view of the ADR Training Committee appropriate to qualify these IFAs to provide advice in the divorce arena.
Our aim has been to take some of the guesswork out of the decision to instruct a financial adviser, be it in traditional or collaborative divorce, and to help protect lawyers and clients from non-specialists advisers who are, frankly, more likely to make mistakes that can cost clients and lawyers alike. Based on attendees at the first training event run in London in November 2006, the entry criteria and training requirements seem to have struck the right balance in terms of ensuring the right calibre of IFA is admitted to the Registers.
Progress to date
Our initial launch of the initiative to the profession was well-received. Large numbers of IFAs expressed interest at first, although only a relatively small proportion have gone forward to the exam, as many do not meet the entry criteria or, worryingly, have not been prepared to invest in the cost of further training.
In terms of collaborative practice the ultimate aim is to develop PODs of suitably qualified IFAs to act as TRUE financial neutrals who hand over any implementation work to a second IFA to ensure neutrality is not only real but perceived as such.
Future projects
Looking ahead there is more that needs to happen:
- An IFA working party should be set up under the Training Committee to develop further standards and protocols.
- Development of an update programme for Register IFAs.
- Essential skills training roll-out for all financials wishing to get involved in collaborative work.
- Potential development of a standardised financial software system for divorce work.
- Additionally, I think that we may have something to add to mediation. Speaking to mediators, I have the impression that managing the meetings and the agenda and the asset schedules, it is often, (for some mediators and in more complex cases) just too hard to also be terribly forensic over the figures going into the schedules. As a result, mediation fails to be an option for those who cannot trust that a completely fair picture will be given. I have the strong sense that there is a model based on a partnership between the IFA on the one hand, hoovering up the data – and really working it over to ensure that it is robust, so as to feed it to the lawyer-mediator on the other.
Stop press
The first exam results are out ….so here is the list of those now forming Register One:
Tim Page, |
Keith Churchouse, |
John Halley, |
Fiona Sharp, |
Stephanie Clark, |
John Simpson, |
Paul Russell, |
Louise Jackson, |
Paul Cobley, |
Karen Ritchie, |
Clive Weir, |
* Within narrow limits, to those born before 6/4/1935, absent a clever scheme involving a stakeholder pension.
Click here for the Resolution web page for more information
