Risk and responsibility
Risk is a four-letter word but then so is skew. For a long time, I have insisted that in our firm we allow the client to fill in the risk questionnaire unaided.
There is just too much temptation to push instead of educate. I admit we do need to position the questionnaire adequately but actually asking the questions is a step too far.
I recall with horror those risk questionnaires we used in the 1990s where we asked people to plot themselves on a scale numbered one to 10. Ninety-five per cent came out as balanced I once asked during a presentation on risk what unbalanced looked like.
Then I think of the IMA sectors when you consider that the balanced managed sector has funds with maximum equity exposure restricted to 85 per cent of the fund, minimum in the UK of 50 per cent with min-imum of 10 per cent overseas.
The cautious managed fund has the maximum equity exposure restricted to 60 per cent of the fund and with at least 30 per cent invested in fixed interest and cash. There is no specific requirement to hold a minimum percentage of non UK equity within the equity limits. Assets must be at least 50 per cent in sterling/ euro and equities are deemed to include convertibles.
I don’t know about you but these limits are a little too wide for me and when their policing is so slack I really wonder what their value is. Let’s hope that a new provider of the stats for this appears and that the committees see suitable parameters, then quietly leave the building.
The RDR is still generating column inches and guidance from some interesting quarters. It is clear that some of those telling us how to be RDR-ready are operating with no previous experience.
Ironic is it not that when exams or tests are obligatory we have people teaching IFAs how to transform their business who have never run an advice business themselves? Having said that is that not why so many providers are in trouble, having relied on management consultants who have never run providers either?
While we are at it, we have regulators moving into advice but taking no liability for their advice.
Not only that but they also do not even have to be level four. So let’s just recap, you can give advice if you work with the regulator under level four but for simplified advice it is level three, I am having difficulty following that and so I should as it is illogical.
This idea of state-provided advice is simply an ongoing ego trip by the same regulators who sought to block the PFS pro-bono project, then came back all friendly when their pilot was an unmitigated disaster.
When you consider the money spent on public education, some of those responsible delivered less value than Bernie Madoff. How is it they allowed Icelandic banks to trade when simply buying The Economist’s Pocket World In Figures guide would have given them the information to see Iceland was an accident waiting to happen, but instead they produce booklets with a reading age of 18-plus for an audience whose reading age is under 10.
If we are to be a profession we need professionals helping us teaching us and regulating us instead of a bunch of opportunists. Last week, we had a national IFA telling us of the need for a common culture, then they declare massive cuts and a minuscule profit. Those I refer to seldom take risk with their own money, why should they when yours is on hand?
Risk is a four-letter word unless you are a management consultant or a regulator.
Robert Reid is managing director of Syndaxi Chartered Financial Planners