Six sense

21 December 2009 8:00 am

Robert Reid

The Cru debacle underlines that far too many advisers do not delve into detail and are too easily seduced by promotional literature and, if my memory is correct, brochures and flyers that featured photos of young ladies in greater density than the key features of the invest-ment being promoted.

A few weeks ago, I stated in this column that most advisers were not totally competent to advise on all investments. Despite the odd negative comment, there seemed to be tacit approval of my comments. In making this comment, I sought to point out that to survive, proving your worth is very important if you are to grow your firm.

I stand by those comments and would cite with-profits and structured products as clear evidence of significant numbers of advisers selling products that they patently do not fully understand.

Quite why the regulator did not pick this up at an early stage will probably remain a mystery. It does highlight the need to raise or at the very least test advisers at a higher level of competence. And before anyone revisits grand-fathering, let me say that the regulator needs to keep up the momentum and push to level six as soon as possible.

I am equally stunned by the number of advisers who seek to become discretionary investment managers in direct contradiction to the JP Morgan research which stated the majority of individuals loosely termed high-net-worth wanted to be involved in all investment decisions in direct contrast to this headlong rush to be a discretionary investment manager. This simply demonstrates that you must get your client proposition right if you are to prosper.

When you consider an apprentice accountant is tested to level four, why would any professional be comfortable introducing clients to someone who is also at level four, the same level as their apprentices? I doubt it would be prudent to see level four as the final destination - I would keep going until level six is attained.

Chartered is where the prof-essional adviser needs to end up unless they are content with a restricted range of options and as adviser to lower-net-worth people. I would contend that this part of the market will increasingly gravitate to web-based solutions so this is not a plan given to longevity.

We need to transform client needs into wants. This requires the right questions to be asked not just by those who become clients but it is equally impor-tant to determine just why others were not attracted. That way, we can refine our proposition and become more efficient.

Having played Santa in front of my own kids, who failed to recognise me, it demonstrates how, in the way a child focuses on the magic of Santa, some advisers focus on the esoteric qualities of the investment instead of its key elements, with particular emphasis on risk. I am no professional Santa but sometimes when some-thing looks the part, it can pass as something quite different from what it actually is.

I have mentioned the Round Table before and if you are under 45 and do not know what it is, I suggest you head for www.rtbi.org.uk. Next week sees us collecting in North London for local charities, with Santa and sleigh in tow.

Best wishes for the festive season and 2010.

Robert Reid is managing director of Syndaxi Chartered Financial Planners

 

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