Some time ago, I was told I should appoint one of the big six accountancy firms when selling a business. They came to do an audit. The partner who pitched to us was nowhere to be seen and the audit team were comprised of a second and first-year pair of students – to say they were a bit wet behind the ears was being kind.
The quality of the audit was poor and I realised company accounts are not a real guide to the current status of a company. Given the level of fees charged, the service was of little value and if the quality is absent, the sole deciding figure when choosing a firm is cost itself.
The debacle that followed the demise of Park Row can be seen as unfortunate in more than one way. There is no doubt the action of its management contributed greatly to the delays in many advisers being registered with new firms and employers.
I cannot believe these advisers should pay the price for the failings of senior management. If they followed all the procedures and their complex advice was pre-vetted, then what have they done wrong? Or is the adviser expected to second-guess its employer competence in compliance issues?
The cost of this exercise concerns me, as stories of batch processing have reached my ears. The contracted firms doing the review are asking question after question, which is fine, but it is not when each question is a fresh piece of correspondence. Batch processing is used mainly by the civil service and, more recently, by employee benefit consultants where unskilled staff are set single simple tasks in succession. This affects the time taken and fees charged. I do not think this is a cost-effective way to assess advisers.
I am pleased the FSA is recruiting in force, as sub-contracting to such firms inflates costs and reduces standards.
For this call to succeed, we need to avoid all the whinging over easier exams (the word “alternative” needs to be banned). Ironically, the recent announcement by Aifa was for an exam that is as yet untested, and unavailable – more time wasted. If, for any reason, it fails to emerge, then all concerned should consider alternative employment, given they may well have forced a change of career on the IFAs that took the bait of the easier option.
But back to my task of determining if the watchers know what they are looking for and could have produced better quality advice themselves. I recall at one point the regulators were wrestling with how a supervisor qualified to financial planning certificate level could control those holding the then advanced financial planning certificate. If the FSA and Financial Ombudsman Service do not raise themselves to level six by default, then they have no right to judge others with knowledge far greater than those sent to check their work.
Those in power need either to get evidence of the qualifications of the checkers or put a programme in motion to fast-track them to level four and beyond.
Robert Reid is managing director of Syndaxi Chartered Financial Planners