If there’s one thing guaranteed to get me on my soap box, it’s the prevalence of vertical integration in financial services. There’s no doubt that it is polarising the profession and, in my view, skewing client outcomes. I am therefore delighted that the FCA is proposing action on the subject. The RDR ‘loophole’ Let’s cast...
Last year, I had the great fortune to visit New Zealand and to spend six weeks travelling around the North and South Islands. The natural beauty of New Zealand well deserves the superlatives that have been accorded to places like Milford Sound, Queenstown and the brooding presence of Mount Ruapehu (Mount Doom from The Lord...
Well, there’s plenty going on in our little sector at the moment. In a matter of weeks we have seen Aegon sell Positive Solutions to Intrinsic in return for some shares and Sesame confess they’re going restricted in 2014. The latest to hit the news over recent days is Russell Investments’ acquisition of On Line Partnership. All exciting stuff!
Unless, of course, you happen to be one of the affected members thrust into that disconcerting ‘limbo’ phase. Trying to find out information from people who don’t know, or can’t say. Trying to second guess what it all means and how to steer a course through impending changes can damage your business. Disturbance and distraction are rarely welcome visitors.
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.
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.
The FSA has conducted a review of incentive arrangements and now indicated, in the strongest possible terms, that it intends to take action to ensure that incentive schemes do not result in customers being treated unfairly.
For me, it is astounding that this “revelation” has taken so long to dawn upon the FSA. Back in the 1990s, I worked in a major bank and was involved in designing a new incentive scheme to drive mortgage sales. That scheme contained all of the “flaws” identified by FSA, including thresholds, multipliers based upon associated product sales and “cliff edge” style features. There was a debate about the concept of adding in a sales quality measure but this was roundly rejected by senior management as being too difficult to measure and not motivational to the staff involved.
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.
Just how do you get a few hundred self-employed IFAs to do the same thing? This is the conundrum facing the traditional national IFA model in which advisers have been given, over the years, freedom to express themselves in choosing investment vehicles. And it’s a big one.