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Art form

We need to keep our eyes open to what is happening in the compliance world beyond the very current TCF and the 2012 RDR. If I asked you what deadline we were approaching at the end of August, I doubt many could answer correctly. It’s the end of the initial disclosure document and menu and the introduction of a new initial disclosure document – the services and costs disclosure document, to be in place by August 31.

Advisers are required to provide information when they first meet their clients about their status, the nature of their advice, details of the service that the firm offers and how they are paid to cover the cost of these services.

Firms now have two simple options when they initially disclose. Either:

  • Develop their own disclosure material, giving careful consideration to the rule-based requirements in relation to their own business models.

  • Use the SCDD or the combined initial disclosure document (CIDD), which will allow them to satisfy a number of Cobs requirements. The new documents within the “customer literature journey” will be relatively simple to incorporate into a compliant sales process but the design and production of the documents will need a serious rethink. This will be the only document which can really sell the advisory firm.

    After all, the minimum any financial adviser or a provider needs to give a client during a regulated sale is a key facts document and, when relevant, an example. As we know, the FSA brand on the key facts must be more prominent than the advisory firm or the product provider firm.

    In reality, those with time to shop around will be able to compare different IFA firms’ SCDDs but I fear, as we get closer to 2012, they will find very little difference between documents as the level of adviser service melts into one.

    The qualification level of advisers and the levels of service may be a deciding factor. But I ask you, will all this information be prevalent in the initial disclosure documents and will the design of each piece resonate, be memorable and recognisable while working harder than it ever has before? I think not and I can say this as I have written disclosure information for over 50 firms over the last 20 years.

    We must all be concerned about the cost of changing all the disclosure material against the backdrop of very difficult trading conditions. I believe the cost of reprinting all marketing materials can be justified if, for maybe the first time, consumers read, understand and retain all the disclosure information given to them. With an average of 10 separate documents provided to secure an advised sale of, say, a £50 a month individual savings account, there somewhere needs to be a simplification of literature quantity.

    The talk of kneejerk regulations being introduced to add more compliance around products makes me worried. It is hard enough to encourage the population to invest sensible levels for their retirement, never mind adding more obstacles about the fact that they may die, may have to pay tax or may loose money.

    Will the wealth warnings also point out that if they don’t invest in a pension, they may die in poverty? My second level of concern is that simplified wealth warnings by default are risky. How would you add risk warnings to an opaque, expensive with-profits fund and a cheap transparent tracker fund and what would they have said three years ago? Remember, compliance is an art – not a science.

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