FSA has failed to deliver its message on risk
Having just returned from the Money Marketing Retirement Summit, I have been reflecting on its content and messages. It is clear that longevity is the key risk we all face and one speaker, Joe Jordan of Met Life (not the Scottish footballer but just as imposing with his views), delivered his message in a manner that made it memorable and transferable.
Another presentation that made an impact, as you may have suspected, was the one on the RDR. It reinforced some unpalatable truths, that is, those operating fee offset are no further forward than those still hooked on commission.
It went on to emphasise that the exams were masking the real issues. If you cannot explain what you deliver - what you provide in excess of product selection and implementation - your turnover is heading south at speed after the RDR.
What brought these two sessions together was the fact that the solution for increasing longevity is the very kind of problem that people will pay for advice on. Managing someone’s income in the decumulation phase is a major opportunity for professional advisers as the option of annuities becomes increasingly less than attractive and extremely inflexible, which is why I have been focusing on this area for some time.
Despite its upside, we need to ensure that if we decide to advise in an area where risk management is crucial, we do so in a way that is acceptable to the regulator. That is why the offer of an FSA session on risk and suitability seemed appealing. Little did I know.
I attended the FSA session on risk and suitability at the QE2 Hall in Westminster. Quite why it had to be in such an expensive venue was forgotten when we saw the set and the floral arrangements. It is ironic that suitability was being debated yet the venue was far from being that.
The phrase “excessive for purpose” springs to mind. If the content had taken my mind off this, I would not have mentioned it but the lack of content was palpable.
We were told what was wrong with investment advice and what was wrong with risk and suitability. Were we shown the right way? No, that was kept a secret.
Some asked for help with due diligence and the responses were as much use as a chocolate teapot. When asked about psychometric testing, the FSA responded that it is neither good nor bad - I think that means they do not understand it. In fact, it was clear that they think flogging products equals advice.
The people attending were there to learn and were there in the main with an open mind. They left thinking that the regulator is out of touch and more interested in entrapment than education or improvement.
The event was a consummate failure in communication. The original paper had enough fragility, it is nothing short of tragic that this was carried into the live event. If it had been a concert, I would have demanded my money back as the “main act” failed to show.
Perhaps we need to reinforce the point by conducting some research with the public to arrive at the best way to get risk across to the layman in a format that works.
Robert Reid is managing director of Syndaxi Chartered Financial Planners