CGT Changes & Simplistic Arguments

On Friday 14th, my focus on a serene, methodical end to the week was dealt a hefty blow by the latest headline on 'ifaonline' - "Only greedy IFAs would dislike CGT change - Fisher".

The main theme of this article was the reported views from an executive at Towry Law, arguing that IFAs who were complaining about the new CGT regime, were doing so primarily due to their commission bias.  Thus, the argument went, the reason many of us are up in arms about the new CGT rules is because this makes Investment Bonds less attractive, which therefore means that...we will find it harder to justify the higher up-front commissions.

It appears that Towry Law, a relatively late convert to fee-based advice, is applying its new-found religious zeal to the creation of market differentiation, based (it would appear) upon the frequent use of caricature.  The public utterances of this company do seem to be remarkably untainted by even the suspicion of a valid argument - but at least there is dedication when it comes to not allowing such a void to hinder dissing the competition.

IFAs no doubt have a range of concerns about the CGT changes, not least the way in which they were first of all introduced, and then the somewhat knee-jerk nature of the later amendment, or the types of client that may be adversely affected - or indeed the distinct probability that the present Government has absolutely no idea of a coherent tax policy, other than the desire to grab as much off us in the shortest time possible.  All of this, however, pales into insignificance when one considers that the most common practice amongst commission-based IFAs has been to establish parity on commission terms across the fullest range of collective investment-based products.

For most IFAs that we have encountered routinely ensure that commission profiles (where these apply) on Bonds and Unit-Trusts are comparable.  If the spleen vented by Mr Fisher were anything other than entirely synthetic, perhaps he might have had in his sights various high-street banks, still inflicting with-profits bonds on their customers, with initial commission rates as high as 7-8%.

No doubt there are more worthy topics to get hot under the collar about, but it is galling to see the specious dishonesty inherent in these kinds of positioning statements, which are no doubt influencing the FSA's agenda when it comes to the RDR.