SJP – above the rules?

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When the adviser charging rules were first promulgated there was a justifiable outcry about how this would benefit bancassurers and vertically integrated businesses. IFAs were rightly concerned about the potential for abuse in the way that costs of sale were calculated: much as they had been for years.

The FSA were very clear. The rules would ensure that businesses of this kind would need to fully cover distribution costs via their adviser charges and that no subsidy from manufacturers would be allowed.

And initially this scenario appeared to play out.

Would you pass the ‘Welby’ test?

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It’s National Ethical Investment Week (13th-19th October) – you may not have heard, because it is also National Chocolate Week, and there is only ever going to be one winner out of those two for press coverage.

Ethical investment (and Sustainable and Responsible Investment) has had a good year. It was gifted many column inches in the press by Justin Welby, the Archbishop of Canterbury, who waded into Wonga, before finding out the very next day that the Church of England invested in its owner. Ooops.

Walking away from responsibilities

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When the FSA published its Policy Statement on legacy assets, it ignored the warnings of the providers about the costs of amending legacy products to be able to accept adviser charging or increments.

As a consequence, RDR Steering Committees in every product provider had to face the harsh reality of whether or not they could justify spending money to alter products knowing that there was no financial case for doing so.

Today, the advice sector is paying for these decisions in a new layer of complexity when giving advice on legacy products.

What happened to old fashioned values?

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Is it me? Is this country in danger of sinking into an abyss of dishonesty, deception and indifference? Whether its horse meat in burgers, LIBOR fiddling bankers or nurses leaving patients to die in their beds, not a day goes by when the news is not full of stories that suggest that the British people may have been shorn of their instinctive decency.

When did it become fashionable to cheat? When did it become acceptable to put profit before straight dealing? When did the narrow interests of the few become so much more important than reputation and the wider interests of the community?

Vertical integration – Jurassic Park revisited

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Vertical integration……a great example of how modern business finds a novel way to describe a concept which has been discredited.

Once it was called a direct sales force, tied to the products of one product manufacturer. Like the dinosaurs, most of the DSFs were killed off by a combination of expensive products, intrusive regulation and risk averse product manufacturers.

With one exception.

What role does a broker consultant play?

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As the FSA focuses down on incentives and some of the root causes of poor consumer outcomes, perhaps it is time to ask ourselves what role the broker consultant plays and what value or risk they bring to a professional advice practice.

At their very best, a consultant can bring genuine expertise (both technical and market) and can help the professional adviser to access provider support, understand market developments, share best practice from other firms and resolve any problems that may occur with individual cases.

But there is a very different side to the consultants in some providers.

Scrapes, skims and tickles

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When I started working in a bank 35 years ago, I was taught that the priority was to provide a great service to the bank’s customers. There was no pressure to “sell” extra products and any applications to borrow money were analysed carefully. The thought that an officer of the bank could sell a product which was unsuitable was just unthinkable.

So where did it all go wrong? Over the succeeding 2 decades, there has been an inexorable process of commercialisation. Profit growth, return on capital and executive remuneration became the new alters upon which bankers worshipped and this has fundamentally corrupted the banking profession.

If the love of money is the root of all evil then today’s banks are egregious examples of that statement.

The triumph of the Olympics

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Only 6 weeks ago, the media was filled with cynical stories predicting disaster at the Olympics. Transport would fail, Team GB could never match Beijing and the £9.2bn cost was a waste of money. The first sign that the public didn’t share these views was the flood of complaints at the negative BBC interviews of...

The search for yield

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One of the biggest risks that advisers face is the client who is seeking the perfect solution. They want a better return but the unstated belief that this can be done with no risk to their capital. I started my career in financial services over 30 years ago and virtually every scandal has had, at its very heart, the greed of some consumers to grab high returns but to conveniently ignore or forget the risk that they are taking.

When faced with the client who demands “higher” returns, some advisers have resorted to recommending products/solutions which they themselves would never buy or which, put simply, they just do not understand.

The thin end of the wedge

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I see that the trade press has finally picked up on a case where a PFS member has been disciplined under the Ethics code for excessive alcohol consumption and aggressive behaviour at a PFS event.

There have been over 50 comments added to the story and reading them is a fascinating insight into the attitudes and approach of our profession. The views expressed range from outrage at the action to total support for the PFS.