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Should financial advisers be volunteers?

financial adviser pro bono workFinancial advisers have a long history of providing pro bono services to the public. Whether it is just to boost the standing of the profession, increase access to advice or simply provide a few words of guidance to family and friends, many advisers take time to help others.

This year in particular, many have come forward to offer their services to workers left in vulnerable positions after the fallout from the British Steel Pension Scheme collapse.

Debate continues over what role pro bono work should play within the advice world however.

A survey conducted last week by Money Marketing found 45 per cent of respondents did not believe advisers should undertake any pro bono work. A total of 25 per cent said between three and five hours a month was appropriate, with 18 per cent voting for one or two hours.

Only 3 per cent expected advisers to be doing six to 10 hours. Just 2 per cent said between 11 and 20 hours of pro bono on the side was most appropriate, while 7 per cent said advisers should be booking more than 21 hours of volunteering.

The dilemma over how to manage work for no pay with sustainable revenue has continued to grow more complex. Technology & Technical director Kim North says the RDR “has killed pro bono” for the majority of advisers who are no longer able to provide the same level of free service they used to. Taking time to provide pro bono services therefore relies on many sacrificing time outside office hours.

Ahead of both Good Money Week and Financial Planning Week, which take place in the coming weeks and aim to increase financial awareness and education, Money Marketing spoke with various commentators to see what role modern advisers should be playing in their local communities, and where their commercial duties should start and end.

In Numbers

11
Major events taking place across the UK as part of Good Money Week

170,000
Advisers represented by the CISI and Financial Standards Planning Board which are supporting World Financial Planning Day on 3 October

16
Firms supporting Financial Planning Week as sponsors, from platforms and life companies to fund providers and discretionary managers

Tough trade-offs

Advisers say business sustainability remains front and centre of their minds when deciding how much pro bono work they can juggle.

A reasonable level of profit and the assurance of a set level of paid work are incorporated into this.

ISJ Financial Planning director Lena Patel says: “I think it’s important to help where we can.

“That’s not about giving everything to everyone, but good behaviour and raising your profile and giving back to the community where you can, however small or big that is. It comes back and will hopefully pay you forward.”

Appleton Gerrard Private Wealth Management principal Kusal Ariyawansa says the amount of pro bono work an adviser provides should depend on their workload at any given time.

He says: “Many advisers are very busy and a lot of advisers have models that also aren’t that efficient and are busy with menial things.

“I’ve done various complex bits of work for people because they’re in financial disarray. I will do that outside of normal working hours, however, and in my own time.”

Ariyawansa says the ability for advisers to provide pro bono work will fall away as numbers decline and the need for their paid-for services increases. He says: “Being able to provide services for free is the ultimate utopia situation but there is still the ongoing reality which is trying to run a business and pay your staff.

“The vast majority of people don’t need complex financial planning and can just be guided to the Money Advice Service or similar for any nitty gritty work.”

North blames the decline of commission for the drop-off in free advice available and also says dwindling adviser numbers increasingly render favours unsustainable for most businesses.

She adds: “Before the RDR, this wasn’t a problem. More people used to have advice and now there aren’t enough advisers around. You used to be able to give your advice for free and the commission would come from the product. With that gone, there will always be less pro bono now than in days past.”

What services can be free?

North says each adviser has their own preference on what parts of the planning and advice process can be executed free of charge.

The pro bono work she undertakes is mostly provided to young adults who are unable to meet fee expectations. Mortgage advice and information is the most common pro bono service she provides.

She says: “It’s a factual sort of advice and you can provide the rates to the person but then not charge them for it.”

Ariyawansa says he does not answer technical questions or provide solutions free of charge but will give basic guidance and recommended appropriate services. He offers both face-to-face and telephone consultations free of charge.

He says: “I’m happy to help anybody, with the basic idea being to introduce the concept of financial planning and tell them how I can help them.”

Patel also provides free initial consultations.

Adviser volunteers

Advisers are arguably more under the hammer now than ever, with increasing expectations from both the regulator and the wider public on standards, services, education and competency.

Yvonne Goodwin Wealth Management managing director Yvonne Goodwin says the framework around providing pro bono work often encompasses more than advisers remember to consider.

She says: “Advisers should do any pro bono work they have planned formally with an institute like the Chartered Insurance Institute, rather than going off ad hoc, because that is the safest way and all work can be monitored and checked by the regulator.

“Just so that everything is clear, advisers should always talk to their professional indemnity insurer as well because you never know when something is going to turn back around on you in a negative way.”

North says advisers should establish which services are best to steer clear of in their pro bono offerings early on.

She says: “The only thing I won’t do pro bono on is investments and pensions because of the regulatory complications.”

Adviser view MM_070814_RushAl

Alastair Rush
Financial adviser, Echelon Wealthcare

Pro bono counselling is incredibly rewarding. I think I have probably helped 5,000 people who would otherwise have never sought advice, from female prisoners at Holloway and then their guards, to Department for Work and Pensions civil servants, John Lewis associates and Honda apprentices.

As a trainee and inexperienced adviser, it gave me an insight into what really worried people, what their levels of understanding were around money and also what their opinions were. By answering diverse questions, it gave me confidence and it increased my trade knowledge in both width and depth.

Pro bono work should be a part of training. Advisers should not view it as a route to market; customers will see through crass practice like that in an instant. Without sounding evangelical, if advisers really do want to restore faith in advisory services, they might find rehabilitation in their parishes. Too many advisers want to forget the roots of their trade. Surgeons, after all, started out as barbers and they are not ashamed of that. We are a community-based service and remembering where our grassroots lie and where we come from stands us in good stead.

Creating a community

This year’s Good Money Week will see events held in London, Edinburgh, Bristol, Glasgow and Aberdeen.

Advisers can attend sessions on impact investing and sustainability, as well as suitability and managing and donating money. Sessions on impact investing and saving will also be available to the public.

The campaign will also raise awareness of sustainable, responsible and ethical finance.

For Financial Planning Week, held this year from 3-10 October, the Chartered Institute for Securities and Investment has called on planners to join its initiative to provide free one-hour initial consultations.

CISI head of financial planning Jacqueline Lockie says: “This is our chance to demonstrate our planners’ social responsibility credentials for all consumers to understand the real benefits having a financial plan can bring them.”

Planners can also sign up to deliver talks at local schools to encourage students to consider joining the profession.

North supports opportunities encouraging adviser engagement in the community but says there should not be an expectation to get involved. She says: “I don’t believe that there should be an obligation on advisers to do pro bono work but, even so, I do imagine everyone has provided it at one time or another.”

Ariyawansa says advisers who balance their schedule well should always have time for voluntary work.

He adds: “If they have a bigger vision, I engage and help people. If advisers are efficient and are focusing on their niche market, they should have spare time to help others. It would be great to say to people ‘pay how much you want’.”

Weighing up the benefits

While voluntary work obviously means the provider does not receive any form of reimbursement, advisers say other added benefits make pro bono endeavours worthwhile.

Goodwin says: “For advisers who have the time to do it, it is incredibly rewarding. I have had some really interesting pro bono clients over the years and it’s fantastic to be able to make a difference for them.”

Patel says working for a particular cause with which the adviser has a personal connection is also a positive.

Working with the Personal Finance Society, Patel provides consultations to formerly dispatched members of the military.

She says: “People appreciate some generic guidance and they might not use your services there and then, but they may come back to you in the future or use your services again.

“There’s always scope for the intention to get something with it but if you go in with that intention, it’s not proper pro bono at all.”

North says advisers considering getting back into providing voluntary services should take the long-term view that the person may become a fee-paying client in the future.

She says: “There are simply a lot of people who can’t afford advice but it’s likely you will be referred to, or they come back at a later time when their net wealth has increased and start to pay for advice.”

For advisers who choose to strike the balance, continuing to meet the regulator’s expectations regarding quality and service is still vital.

Goodwin says: “Advice, free or not, needs a proper structural framework around things. It’s a bit dangerous really otherwise for all concerned.”

Expert view


Getting closer to the public helps place advice in a better light

Pro bono is derived from the Latin “pro bono publico”, which means “for the common good”. Another relevant Latin phrase is “sui servientes”. This translates as “self-serving” and there are a couple of examples of how it has applied to me over my career.

Years ago, the FSA’s Money Advice Unit ran a programme to provide education to workers. It was called Making the Most of Your Money and involved presenting a pack covering borrowing, saving, investing and insuring. I was one of the many volunteers who delivered it. I can’t count how many times but I did at least one session a month. Taking account of travel, they cost me about half a day. I think I got more out of it than the employees. It gave me great insight into how hundreds of people thought about money and I could drop this into relevant client conversations. It was a genuine differentiator in my day-to-day work.

I also became a member-elected director and trustee of the Ernst & Young defined benefit and defined contribution pension schemes.

Again, a significant investment of time; reading board papers, attending board and investment committee meetings, and going through the Trustee Toolkit learning process. I learned a huge amount and was able to apply this in client situations.

My tip to other professionals would be to avoid giving free regulated advice. Perhaps there are opportunities to provide communities with free regular sessions on financial topics that you can be involved with. And who knows, some of the attendees might become clients.

Malcolm Kerr is an independent consultant

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. I suggest advisers need to distinguish between (1) free advice and (2) pro bono work.

    If you’re going to conduct regulated activities without charging for them, recognise that this is your choice and there are risks associated with it – not least, it’s still regulated activity and you’re on the hook for it.

    Pro bono work is something you do for the good of the people (with the unabbreviated phrase being “pro bono publicis”). It’s not part of your business – and, if it’s not done by way of business, it’s not a regulated activity.

    How do you tell the difference? Well, the FCA have a chunk of their rulebook devoted to it (https://www.handbook.fca.org.uk/handbook/PERG/14/5.html) but I suspect there are some simple things that could trip you up – like claiming expenses and/or tax deductions for work you say is pro bono.

  2. In my opinion free advice should be given to those who you think will recommend you to fee paying clients, or become one themselves.

    In which case you may possibly put the free advice down to PR and claim it against your tax liability.

  3. I too was one of the presenters who delivered the FSA Making the Most of your Money presentations to workers in my case in the West Country. Whilst I was happy to give my time and expertise, I was always conscious to point out to the audience members that one size does not fit all and the need for advice on their individual circumstances was vital. I would thoroughly endorse Malcolm Kerr’s comment about not giving free regulated advice. The value an IFA can offer and provide needs to be viewed as both important and essential and as such should command the commensurate Fee. What was that great advertising slogan that read” re-assuringly expensive? I also recently saw a simply brilliant statement on the wall of the reception at an architect’s practice:
    ” If you think using professional is expensive then just wait and count the cost of using an amateur!”

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