As a business, we use what is published by the FSA to check against our own practices. It is a really simple approach to making sure that what we do will stand up to any regulatory scrutiny.
The publication of final notices is a good example. A regular session at our monthly best practice meetings is to discuss the content of any recently published final notice with the team and look for any examples of the things we are doing that could be interpreted as a reason for enforcement action against the firm or individual in question. It is a very useful sense check to make sure we are not making the same errors.
The publication of the recent guidance consultation paper on assessing suitability when it comes to establishing the risk an investor is prepared to take with their money is a good example of how valuable these FSA publications can be.
This has been a really important subject for over a decade, so advisers who are only just starting to review how they approach risk-profiling specifically and the investment advice process generally are coming very late to the party.
A lot of the coverage of this paper has focused on the FSA findings about the use of risk profile tools, with its report that nine of the 11 tools it assessed had weaknesses that could lead to flawed outputs.
This resulted in immediate calls from the IFA community to publish the names of the tools that failed to live up to the standards determined by our regulator, which is sort of missing the point.
Leaving aside the fact that it is easy to compare the tool you use with the examples of good and poor practice published by the FSA, the quality of risk-profiling tools was only a tiny part of the bigger issue identified.
It is the process of delivering suitable investment advice that is under scrutiny in this paper, not simply the tools that advisers elect to use within this process.
When any investment risk-profiler tool is used without a sufficiently robust process to support it, the resulting advice stands a good chance of being unsuitable.
The same can also be said for investment advice delivered without reference to goals and objectives. We often see examples of this from banks, stock-brokers and discretionary fund managers – although by no means all of them have this failing.
Rather than directing the usual level of criticism and vitriol towards the FSA, advisers might start reading the material they publish and learning from it, using what is said to improve the way that they approach the delivery of advice.
Martin Bamford is managing director at Informed Choice