We need people we can trust in this way to lead us through the bits of life where we have no knowledge and this brought the development of the professions. Their disciplinary code still has the central premise that if you are caught putting your interests ahead of your client or patient, you are struck off.
To become a profession, financial advice practitioners need to show a substantial cadre of those who set a clear standard of advisory process and ethics. This has to be commercially successful but that comes behind setting a definitive code of professional conduct if it is to serve the longer-term interests of society.
RDR2 seeks to lay the groundwork for that development but is being mercilessly lobbied by those whose services put shareholders first, not clients. There are many whose clients think they are independent, although they are multi-tied, and there are those who, in effect, form a fifth column within the group that the professional cadre would be drawn from. These claim independence when they are tied to their in-house fund management group which pays their fees. Their model is every bit as short-term shareholder and profit-focused as any tied agent. I recently asked a standard-bearer of this sector to explain their model to me. He said, “My adviser acts as a conduit to the centre which gives independent advice.” So the adviser is not independent, the decision-making central system is. This is not independent professionalism as any consumer knows it.
My firm, a typical IFA perhaps, would answer the question, “The adviser gives independent advice to the client supported and supervised by the centre.” In other words, the decision-making unit is the client and the professional together, as it is in law or medicine. After that, specialists and others are called in as necessary. Both of these are valid ways of providing financial services. But to accord both models the same professional status is to perpetuate the confusion inflicted by the lack of a clearly defined professional standard of method and behaviour.
The lack of clarity allowed by the FSA is the reason for financial services’ poor reputation. Almost any model can describe itself in the same terms as the best model. If anyone could call themselves a solicitor, that profession would not exist. In financial services, the name adviser and the name planner mean something to their practitioners that they do not mean to the public so abuse of the title is inevitable unless the regulator demands consistency. This single clear naming of things is what the RDR has to sort out once and for all. That is really all the RDR needs to get right – what are the defining elements of the method of those who serve the customer first and themselves second and what should those that do it this way be called?
The trouble is that all the money and power is with those in the industry who loathe clarity. If your mission is to sell more profitably rather than to close the savings gaps by building a clear market structure of professionals, good salespeople and execution-only traders, then complexity and a lack of consumer understanding serves you well.
In the end, you are either the agent of the client or the agent of your employer and only those who see the client as their ultimate boss are truly professional, good as the rest may be. I only hope Dan Waters gets that point as Amanda Bowe perhaps did before she was mysteriously shuffled, Frank Field-like, just when she had got the hang of it.
Tom Baigrie is managing director at Baigrie Davies Lifesearch