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Editor’s note: Advisers need to prove they have a process for firing as well as hiring

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



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Whilst I sympathise with business owners in this situation, everyone knows that there is only 1 right course of action. Whilst this may result in a loss of revenue, it is still the right thing.

    The loss of revenue can be managed, the business going bankrupt through the actions of one person cannot.

    As such I think more business people need to think about it that way.

  2. Neil Liversidge 23rd May 2019 at 1:07 pm

    While I prefer hiring, I’ve never had any difficulty firing when necessary. Everyone I employ understands why people get fired. There are the usual and obvious reasons, e.g. any instance of dishonesty, but over-arching is the need to protect everyone else’s job by getting rid of anyone who’s endangering the firm, especially if they’re damaging the brand. I explain this at the interview stage and illustrate my reasoning by reference to the example of Rover Cars.

    For those who don’t remember, Rover was originally British Leyland. In the 1970s BL workers took the proverbial. Strikes were rife. Some ‘workers’ were pictured in tabloids sleeping on the production line. Quality was abysmal. The management, including HM Government of the day, because BL at the time was a nationalised industry, was to blame. It feared strikes and the militants in the workforce epitomised by Derek ‘Red Robbo’ Robinson, knew it. Eventually Michael Edwardes was hired. He sorted out the problems and Rover, as it became, was saved for thirty years. The brand, sadly, was beyond repair. Eventually BMW bought Rover. The workforce took pride in the product and in itself and quality went through the roof. I owned a 2001 2-litre diesel-engined 2001 Rover 75 Connoisseur. At the time it was the best car I’d ever owned. The problem was, it had a Rover badge. The brand had never properly recovered. Rover couldn’t turn a profit for BMW.

    In 2005 BMW closed Rover and all at Longbridge lost their jobs, some personal friends of mine amongst them. In essence, the ‘good guys’ of 2005 were made redundant by the layabouts of 1975 and the cowardly management of that time.

    As an owner-manager, I can think of only one thing worse than having to fire good people who are doing their jobs well because the business had failed: having to do it because I’d been too cowardly to fire those who needed it and thus had brought the failure about.

    Fire when necessary for objective reasons. It’s your duty, for the sake of everyone else you employ. Your conscience should be clear.

  3. The problem with all this (as I mentioned in the other article about this) adviser, firms and networks what it all ways.

    Mandatory novation is the answer !
    Lets end this financial liability “fly tipping” once and for all, I am, and my clients are, sick to the back teeth having to fork out for poor advice and rip off merchants.

    Now from an advisers view point, he/she is responsible for the advice and recommendations they give if they leave or get sacked they must take their clients and book with them, now that alone should make advisers sit up and make she they are taking personal liability for the business they write. They either have to take personal responsibility to get run off cover, their own PI or any company wanting them to join, MUST consider the risk they are taking on !

    Firms or networks (left behind) would not have to pick up the tab for a rouge adviser’s book load of rubbish ! while he/she phoenix’s into another company only to do the same over and over again.

  4. John Stirling 23rd May 2019 at 2:18 pm

    D H there is something to what you say, but as with most ‘obvious’ answers it covers a lot of ground. Bank advisers, following the banks instructions and consequently giving poor advice are then rendered unemployable through little fault of their own.

    It’s a nice idea that we all suddenly become strong willed fighters for justice against evil corporate overlords, but a bank adviser realising they have a problematic back book still have to pay their mortgage.

    Firms controlling their advisers, and taking responsibility for their advisers is probably the least worst option.

    • Hi John even if someone was coming out of a bank type environment, (you would have to say most bank advisers are building up their own clients) would indeed market them if they moved to another firm …
      Now if you were thinking of taking on said adviser to your company ….would you be comfortable with a novation agreement to bring them across or leave all the liabilities with the bank take on the adviser and do new letters of authority?

      The thing is a good adviser is a good adviser, I would have no issues with a novation agreement with my clients and stand by the advice given at that point in time, and I would be able to highlight client types, business written and funds used.

      The thing from a firm, network and bank prospective is greed …funds under management, trail, ongoing fees and a nice warm client bank for someone to work ……..or is it a ticking time bomb ?

      Harsh sales tactics from employers is a thing of the past (hopefully?) so IMHO the advice and recommendation is down to the adviser and suitability is key ….ticking boxes on monthly review forms, one to ones and the vast majority of “compliance” is crap !

      Advisers following banks instructions and consistent poor advice ….don’t deserve to get employment elsewhere !

      • Philip Castle 23rd May 2019 at 6:23 pm

        I’m with you on that. I would add that I was (in my opinion) a good and honest bank adviser and I still am. The bank advisers come in for a lot of stick, but actually on the whole, I think most were actually BETTER advisers than a lot of “brokers”. PPI had nothing to do with advice, NatWest had massively more compliance in the 90’s and oversight than I saw when I first looked at what other small advisers were doing. The main reason they have fallen foul of complaints is they haven’t maintained the same relationship manager (adviser) for any length of time so they are not there to add context to defence of complaints when they arise unlike small advisory firms where we keep our clients happy with the same core team and with good KYC resolve a potential problem before it becomes an “expression of dissatisfaction” formerly called a complaint.

        • I would agree that bank assurance Advice Standards have improved massively.

          On one project we were reviewing complaints that had been (correctly) rejected 5-6 years earlier.

          My recollection is that a significant proportion became upholds.

          This review happened during the FSA days.

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