Clients are not stupid, Ford cars would be shunned and they would have gone out of business quickly.
Obviously, any local garage or service centre has neither the resources nor the technical ability to disassemble the whole car into thousands of pieces and stamp each part as approved.
Unless I am hugely mistaken, the biggest problems in retail financial services (Arch Cru, Key Data etc..) have been fundamentally problems with the product and not the advice.
How can it be possible to hold a small regional advisory service accountable for a fundamental problem in the product being offered?
Advisory firms are cautious and they are astute but is it really a fair burden on the profession?
I need your help here, for the open letter so please reply back with your feelings on the real question…
If it’s the products manufactured that consistently do damage to the public then why don’t we have a regulator that focuses on where the problem is?
Surely, the entire purpose of the regulator is to regulate where the problem is?
One leader suggested FOS regulation for adviser firms unless there was a persistent problem and then FCA intervention for potential “offenders”. The FCA can then spend it’s considerable budget on where the problem actually is?
Don’t think things will never change, the public are not stupid and they won’t suspend belief forever in a system that doesn’t keep them safe.
If you haven’t completed the 2 minute FCA cost survey then click here: http://www.retiringifa.co.uk/fcacostssurvey.php
If you have any thoughts for the open letter please just comment below.
I haven’t completed the survey yet I will have a look later on today.
Stephen, the problem you so eloquently outline comes from the fact that our industry operates under the Law of Agency which transfers product liability to the paid distributor. Very simple but very difficult to change when you look at the benefit to providers and others with vested interests.
Hi Stephen,
You are absolutely right – the public are not stupid – but they are apathetic. If a ford car is defective – little will be done – until people are actually killed or maimed through the defect.
The enforced ongoing poverty, loss of life dreams etc. of some investors [who obviously have more money than sense] doesn’t seem to hold the same emotional pull…
That’s the problem.
The problem that the fca would have in vetting products is that if the product still failed there would be no one else to blame!
Arch Cru – we had one client, who invested £15,000 out of a total portfolio of £1.5M – so hardly disproportionate. He was aware of the risks of private equity investment but, like us, he was not aware of the risk that the managers would invest in areas never discussed or disclosed or that the auditors, custodian trustees and regulators would all be asleep on the job.
Under the FCA compensation scheme Capita (whose sole function was to ensure that everything was invested correctly) paid out £2,000 and we paid out £8,000 – so effectively we were held 80% responsible for something over which we had no control and could not reasonably have foreseen. Bitter? You bet!
I have to agree with your sentiments. The FCA regulations place a huge and largely unwarranted cost burden on small ifa firms who in the main just want to try to provide a decent and professional service to their clients.
A very long time ago the observation was made that it didn’t matter how clean the pipes were, if the water was dirty people got sick. This observation was made when regulation was first being discussed and has been made time and time again since then to no avail. The injustice perpetrated on the adviser community by the FSA over the Arch Cru affair seems to me to be generally acknowledged but still they get away with it and the reason they do is the regulator is unaccountable. If Sants can tell Tyrie to get lost (as he did over the RDR proposed implementation delay) and then get a knighthood for overseeing the catastrophic bank failure then Wheatley can do the same.
I did take a look at your cost survey but don’t know the extent of the opportunity cost of the time spent on compliance other than to say it is extensive. If you are presenting figures to Tyrie I thought it would be as well if they were accurate and not a guestimate.
The Financial Services Regulator or Regulators must regulate in order to protect both the general public of the UK. and the financial adviser community alike. However they have clearly failed to so on many occasions due to ineptitude, lack of skill and massive void in respect of suitably experienced staff as a whole.
With the advent of the changes to the regulator recently isn’t it now the case that one pat of the regulator regulates advice and advisers and the other pert regulates providers and institutions?
In respect of advisers being penalised for recommending product providers that have collapsed. My view has always been that if you are recommending offshore products or other non-regulated investments then you are subjecting yourself and your client to a very high level of risk indeed.
In summary, the regulator must regulate effectively. However, they haven’t done so in the past and I don’t see that this will change.
I am informed that the U.K. followed the U.S.A. a fair few years ago in deregulating financial markets. And they took the regulatory responsibilities away from the Bank of England to these other organisations.
As an adviser (highly qualified fee based financial planner) I am not interested in “product”. Our “product” is “advice” (non as well as regulated). We charge for advice; we charge again for implementation. We expect “product” to be regulated and therefore that side of the due diligence process to be adequately handled by the regulator. Of course we know that’s a waste of space as the regulator sadly appears to take little or no responsibility when it comes to financial liability.
The problem goes back to the early 90s when, during that recession, the big four firms of accountants laid off all those graduate trainees/early qualifieds deemed not to have the necessary qualities to make manager or partner status. Huge numbers went to work for the PIA and the joke was…” we’ll have regulation by audit trail within a few years!!” Well , we did didn’t we.
So great was the subsequent FSA focus on “product” that the industry became dominated by the new “compliance” industry to the almost total exclusion of the client and a genuine advice process, as proven by the subsequent need to introduce “Treating Customers Fairly”, which was, of course the norm before excessive regulation and the compliance tick box approach killed of all normal service standards.
We’ve seen the demise of the industrial salesforces to the horrendous detriment of the lower socio/economic classes – they did a good job. The recent death of target driven bank sales forces is to be applauded – long, long overdue.
Most recently we’ve had the new FCA CEO claiming that adviser numbers have increased, perhaps recently with the influx of those bank advisers who actually had a qualification but, otherwise numbers are down, again to the detriment of the consumer.
I could go on.