RDR: it's the principal of it...
By Jane Hodges, Managing Director, TCC.
So, the new Financial Consumer Association has been given the remit to ban products and publicise when they are thinking about enforcing against a firm? The FSA has finally managed to reduce their fees because they have collected so much money from fines this year, on the other hand the FCSC has increased their levy on all IFAs because of the shortcomings of a few? UCIS are unregulated but the advice is? Wraps are not a product; they’re a piece of software, aren’t they? Units trusts are clearly better products than investment bonds, aren’t they? Caveat emptor exists in the financial services industry, really? Is anyone confused? Maybe I should just stop reading about what is happening in the industry.As a chartered financial practitioner, I have started to work through my gapfilling requirements. According to the CII Gap Tool, they appear to be so numerous that I am almost considering just sitting the exams again. I spent last weekend studying ethics v morality. Apparently, ethics are universal. I consider myself to be very ethical yet when faced with the question that if I knew my fellow adviser had huge gambling debts, what would I do? Tell my manager? tell the MLRO? Advise him to speak to the Citizens Advice Bureau?…..I really didn’t think they were universally known.
I can’t think why our biggest worry with RDR is whether our more mature advisers will decide to leave the industry because they won’t sit the exams. My biggest worry is that there is little to no new, young advisers joining and firms setting up in the industry – and why would they? After 25 years, I am beginning to understand it less and less, the margins are getting smaller, the risks of censure getting bigger and there is still no 15-year long-stop. If I was one of those investment angels, would I try and invest in a new
IFA business? Would you?
So, RDR isn’t about whether you can manage to pass your diploma qualifications and, whoopee, off you go through the 2013 barrier. It is about finding a way of working and giving advice that is commercially viable, treats your customers fairly, is universally ethical and is robust enough to survive the FSA and the FOS where it feels sometimes that they are changing their mind about what is good advice 10 years after the event as if we all should have known it anyway when they didn’t seem to either!
Ok, that sets the scene. So, how do we train our new and existing advisers to deal effectively with this industry so they can build and/or develop their careers and live up to these grand professional qualifications we will all have? For me, we might finally be focusing on some of the right things. For years we have tested advisers’ technical knowledge, we have forced them to learn rules and regulations and we have checked that their advice documentation stacks up. When principles-based regulations came along, it felt like one more thing on top of everything else that the FSA could beat us with and force us to expend even more precious time on proving it to them – no wonder that TCF and ethics became often hated and ridiculed!
But maybe existing long-standing advisers, who are so frustrated by what they have seen over the years that they now expend too much energy declaring their frustration in the press; and the speakers I see at conferences berating the industry for being so childish as to not have accepted TCF years ago, yet haven’t tried to run commercial practices, thereby annoying advisers even more; should stop.
Maybe all of us should just draw a breath, stop getting angry about everything that has happened and calmly think about the good things about having principles and strong ethics in one of the most important industries we can work in. Maybe we should start our training and focus calmly back at principles stage….and I don’t mean just learning the FSA’s 11 business principles by rote….I mean helping advisers understand and feel what they really mean so we can be more than just “qualified” advisers post-2013 but actually know how to build great long-term businesses on the back of strong principles.
This article first appeared in 24th February 2011 edition of Money Marketing
