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Bonus operandi

Chasing commission has blinded the industry to its ethical responsibilities

If you think about it, millions of people turn up to work each and every morning with the expectation of a modest salary in return for a days work. They have no expectation or preconceived notion of a performance-related bonus or commission element, save perhaps an annual pay review or a Christmas bonus. So why, as an industry, do we still persist with the notion that anyone who arranges a financial product deserves some kind of commission-inspired payment for doing so?

Wander into any bank and you will see what I mean. Most bank staff these days earn points (and prizes) just for bumping customers up an account or two. On the whole, people recognise that banks are just huge sales machines designed to get the unwary to sign up to the next financial fad or gimmick. And it is this mad desire for sales that has been the fuel for scandals like the pensions and endowment reviews.

We seem hell-bent on recruiting sales types to the role of adviser, instead of good, solid people who are motivated by a steady income and the desire to organise a client’s financial issues.

Our own firm, for example, has a model of working that I would hope thrusts us to the top of any treating customers fairly audit almost by default. I am sure that more conventional models have particular advantages over ours – volume motivation, for example. But in smaller firms, I believe we have the chance to display an ethical and TCF advantage over larger and less service-concerned entities.

We do not spend any of our time monitoring targets and calculating rates of pay. We never have any squabbles or animosity over non-income producing work, which, in a smaller firm, is increasingly problematic. And we can treat all customers with equality and fairness, which admittedly won’t earn us as much as our larger and, to be frank, more Machiavellian peers, but will hopefully result in job satisfaction and happy clients.

Our model also works just as well for the fee business we do, which I am pleased to say is on the increase. I also accept that it is possibly harder to achieve this ethical ideal the larger a firm gets, but with appropriate systems it can’t be impossible. The fact is though, it is just not wanted in most quarters.

On the face of it, our model seems crazy, but that just indicates the blinkered way of thinking we are all brainwashed into having.

At a recent conference, I put forward our model of doing business. Suffice to say, it was met with some wild and incredulous glances. But afterwards, several people came up to me and commented, mostly positively, on our modus operandi. When they learnt that we had been doing this for the last 20 years, astonishment wass the reaction.

I suspect not many firms operate in this manner but I have to ask myself, why not? It seems we are so conditioned to think this way that no other way is even worth considering.

The challenge is to change the way we think and to design a system that will allow the financially motivated, yet honest, advisers out there to do what they do best.

But how do we go about it? And is it a strategy that would spell disaster for our addled industry? It was of course the whole point in trying to get us all to move to a fee model, and we all know the poorly-designed processes that are currently in place trying to achieve that particular, yet laudable goal.

Market forces will dictate who wins, but the ensuing melee will be fun to watch from a distance.

As I have lobbied so many times before, if we could just be left alone for a while to get on with our jobs, confidence would grow and cynicism would decrease. But the process of change, ironically, has to happen from the bottom up, not the other way round. Endemic commission expectations seem to have polluted our world to such an extent that no other way seems possible. Answers on a postcard please…


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