Let’s Annoy Regulation and Talk Up the Benefit of Advice
There is no shortage of Wannabe critics at the moment and they all have their agendas.
Most also have a desire to live in a fantasy world, where thanks to their actions and our cash, they can move to a world of fairies and unicorns.
A nebulous letter sent recently to advisers by Debbie Gupta gave an insight into the FCA’s thinking on a sector that provides FOS with only 2 in 1,000 of its decisions to compensate.
Firstly – Consumers receiving unsuitable advice for their needs and objectives. Oh really? Is that the client’s needs or what the FCA thinks the client needs? For instance; the FCA’s blanket belief that all pension transfers are wrong is at complete odds with the immediate needs of people, particularly the wrong side of redundancy. These views emanating from an organisation with few who have any advice qualifications
You could also ask when is this judged? When the advice given or when the client needs have changed. FOS generally sides with the latter.
But this first issue avoids the major point. What about the 12m+ consumers who no longer have access to advice. Where do they go? Ms Gupta will no doubt believe that they have avoided a terrible fate and will soon be better getting advice from the Unicorns or Robo-Advice as it is called
One of my members commented that:” if this is true after 40 years of regulation; whose fault is it?”
Secondly - Falling victim to pension and investment scams
Not primarily an advisory issue so FCA what are you doing about it with your £600m budget? You have made proper Pensions Transfer advice untenable, disfranchised 12m+ consumers and fail to police the scammers effectively. What did you expect?
Next - Not receiving redress….
This whinge is; when FOS decides on what is “fair”; some advisers do not or cannot pay out. Again, we are invited to their fantasy world where FOS does its best to destroy Professional Indemnity Insurance and then acts surprised when the PI insurance fails to stump up. The answer is simple; return FOS to Common Law principles and stop FOS inventing ‘law’ – or more accurately Draconian and arbitrary rules on free independent citizens and their business - as it goes along.
It also deliberately fails to understand Company Law. Faced with a claim that the funds of the business including PI cannot pay; directors are forced to put the firm in administration immediately. No argument.
Finally - Paying excessive fees or charges for products and services
Totally true. 20% of all advice fees go in costs created by regulation which include the FCA invoices, FSCS imprests and regulatory dead weight costs charged to advisers but incident upon their clients. If you add general taxation costs to the regulatory costs upwards of 60% of advice fees end up with government bureaucrats. As for the FCA, it creates cost and then complains about it. Karl Marx would be proud.
We need to see this for what it is – the substantiation of a failed system and a bid for more power.
So, what should advisers do about it?
Ignore the FCA’s whinging and have a real conversation with your clients about the benefits of professional advice. Let is start with Independence. The need to do this is underpinned by a number of surveys. You are an Independent Financial Adviser. That’s your first USP. Restricted Advisers can put their case too
How many of your clients know you are independent? Surveys tell us you would be lucky to hit 50% recognition. Half your clients do not know of your independence.
Then you we get to the real question. Do those who know you are independent understand what it means? I haven’t seen the latest surveys but last time it wasn’t pretty.
For some the word “independent” was seen as a negative. Small and dodgy like Trotters Independent Traders. Hence why we are now the Impartial Financial Advisors Association. This both avoids any Delboy connotations and allow us to include Restricted, Independent and Both firms. Of course the FCA is NOT independent at all. It is unaccountable.
So, your first task is to ensure your client understands your USP. But that is just a starter.
Having ensured your clients understand the concept of independence advice, your next job will be to explain the benefit of taking professional advice.
You can find it all in the Heath Report 3. Section 10. (PDF copy available by emailing [email protected]
THR3 has four different pieces of research from the UK and across the world which shows the benefit to the consumer of taking advice.
In the UK, ILC-UK showed that consumers were 8.6% more likely to save than unadvised and increased their wealth by £43,000 in 7 years. Those in the income group of “just getting by” had an even better result
In the US, Russell Investments in their research” Why Advisers Have Never Been So Valuable”, showed that clients received 4 times the benefit than the adviser’s cost – so much for the excessive charging.
In the UK, Vanguard showed that clients received a net benefit of 4% on their returns.
In Canada, Advocis commissioned their top university to discover that over a 6-year period advised households accumulated over 58% greater assets than the unadvised. 173% over a 15-year period.
Advice Is Good for Your Wealth
You can see that the case for taking professional advice is overwhelming but we keep it a secret. The best way of gainsaying the regulator’s perpetual denigration of your work is to tell your client what you do. And then tell them again and then tell them you told them!
It is time for every adviser to inform their clients of the benefits of advice and let us make it a campaign. IFAA can distribute a press release but IFAA members have around 10% of those advised circa 600,000 consumers. If all advisory firms did it; we could hit 6m people and that’s more than any newspaper in the UK.
Throughout the eighties the old IFAA distributed over 1m “Value of Independent Financial Advice” booklets. It was the first Crystal Mark document in financial services. It is time for a new one.
We will get this done for the autumn. There will also be an MP’s briefing document.
Action Points
1. Tell your clients about the benefits of financial advice
2. Get other advisers to join IFAA – we need your membership and funding. Join us