When I first joined Money Marketing, my former editor Natalie Holt gave me an excellent nugget of wisdom.
While financial planners give invaluable advice on personal finance, she said, remember, the vast majority are small business owners as well. They face the same challenges as any small- and medium-sized enterprise; namely, how to recruit the right people, how to train them properly, how to pay them and how to grow their business sustainably.
These challenges haven’t changed since I started. In fact, they have become more acute. But a new one has risen to prominence. It’s not how to hire, but how to fire underperformers.
While the vast majority of advice has improved in quality during my career in financial journalism, we continue to see networks and individual advice firms brought down by the actions of rogue advisers. Catching them is only half the battle when showing them the door remains fraught with difficulties. Restrictive covenants can still result in legal battles, as can claims of unfair dismissal when the “right way” to give a recommendation is always up for debate.
Going back to the small business point, can a firm of, say, four advisers, really afford to give up a quarter of its revenue generation if it decided to give one of its planners the boot?
Yes, it must be frustrating having to wait months for the right candidate to join your company. I’ve been through that myself as a manager. But that issue pales in comparison when put next to the potential a single dodgy adviser has to put the company out of business altogether.
Movements in regulation are suggesting an ever-stronger case for tighter controls from bosses and tougher action against advisers that step out of the firm’s line. For a start, the Senior Managers and Certification Regime will place those at the top on the hook for failings.
The FCA just this week fired a warning shot to investment management principals over how they monitor their appointed representatives.
Think about professional indemnity insurance bills too, and the impact on a firm’s reputation the second words like “unregulated investments” start getting bandied about.
This is why nationals like Tavistock and Sandringham have made their position clear recently: we are going for quality over quantity when it comes to advisers, and we will not hesitate to manage you out of the business if you don’t meet our standards.
Time will tell if the impact this has on revenue will be unsustainable. But from the perspective of managing regulatory risk, I can imagine a host of firms are making similar noises to their own advisers behind closed doors.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1