I’ve worked advising insolvency practitioners since the early 90’s. From 2004 to 2017 I was a director of unashamedly commercial debt management and IVA provider, ClearDebt.
I’ve never made excuses for poor fee-charging debt advice. There is less of that about now than there was, thanks to the FCA, but it hasn’t gone completely. I am a strong advocate of a mixed economy: Britain’s need for debt advice is so big it can never be met by the free sector alone.
“I really believe TIP gives free-sector advisors the confidence to refer people for an IVA.”
For years I’ve been speaking about the need for free and fee-charging debt solutions providers to work together. I’ve always felt happier when talking about individual voluntary arrangements (IVAs) rather than fee-charging debt management plans.
Frankly, there are fewer occasions when a fee-bearing DMP makes sense for the client. But, there are many times when an IVA is better for someone in debt than even a free debt management plan. It’s likely to require the same monthly contribution as the DMP but will usually finish years earlier – costing thousands less.
Making the change
Lou Yates approached me with the idea of TIP (The Insolvency Panel) at a time when I was seriously considering my future. I’m 61 and not ready for retirement. But, I was looking for something that I felt would cap my career. Something that would be seen by my peers as a real contribution to helping Britons in debt.
TIP is this. And it is happening right at the moment it is most needed.
IVAs are Britain’s most popular formal debt solution – but they are still only running at a rate of 50,000 to 60,000 a year – when there are around 8m Britons in debt and only one in five of them is getting advice.
I think debt advisors from AdviceUK, Citizens’ Advice and other free-to-client agencies should be advising IVAs much more often – but I can’t blame them for not doing so: IVAs can’t be trusted anymore.
Can an IVA be trusted?
IVAs were seen as a safe haven by some debt management organisations who feared they would not get FCA authorisation (and some of whom only got authorisation for providing debt advice, not operating debt management plans). In turn, insolvency practitioners, who can only give debt advice in “reasonable contemplation” of providing an IVA, saw these agencies as a new source of cases.
This has led to a number of problems. Not least that the very high prices charged to IPs by the new generation of lead introducers seem to have led to an increase in the costs some IPs recharge to creditors. This reduces returns and increases the risk for people in IVAs who have low disposable incomes. And, thereby lies another problem. Disposable incomes of people going into IVAs have plummeted in the last year or two. I think, these new lead introducers have found it easier to pick low-hanging fruit – people in dire straits, desperate for a solution many of whom would be more suitable for a Debt Relief Order (DRO).
So the IVA – which seems to me often to be the best debt solution for ordinary people (Or, at least, the one against which the outcomes of others should be compared). – is now being put in place for people who don’t need it and, ultimately, can’t afford it. Free-to-client debt advisors have been telling me for some time that they are seeing more and more clients struggling in IVAs. And, their advisor believes, they should never have been in an IVA.
Trust in the professionals that provide IVAs has gone.
Better IVA Outcomes
This is where TIP comes in. We are all about better outcomes in IVAs:
- Better outcomes because we will only take leads from free-to-client debt advisors. So there is no possibility of someone having been “sold” (or mis-sold?) an IVA.
- Better outcomes because IPs on TIP’s panels won’t charge unusually high “disbursements”. And their fees will be amongst the lowest available. So creditors will see better returns across their book.
- Better outcomes because independent, free, FCA authorised advice and low charges will create more sustainable IVAs, less likely to fail.
Lower failures mean insolvency practitioners get better returns across their casebook. A better outcome for them too.
TIP IVAs will be surrounded by financial capability services too, helping to make them more sustainable, improving outcomes for every stakeholder, and genuinely rehabilitating the customer, which is a better outcome for the individual and the nation.
Funding for free debt advice
Finally, most of our profit (and always 40% of our gross income) will go to fund free debt advice through the independent TIP Charitable Trust.
Debt advisors who want to know more should sign up for info here. Insolvency practitioners who want to join the waiting list to join the panel can add their details here. Information for creditors is here. More for everybody soon.
Don’t confuse my passion for pomposity. I really believe TIP gives free-sector advisors the confidence to refer people for an IVA. Because, central to what TIP does is our use of data. TIP IPs share their data with us, with creditors and – most importantly – with the advisors who send potential cases. And we will use that transparency to create a circle of improvement – TIP will create better a IVA.
Latest – see more of my views in The Official Gazette, published on 6 March 2018