The recent publication of the ethics and competence paper reminded me of Pete and Dud, that is, Peter Cook and Dudley Moore, who are sadly no longer with us. I prefer to hark back to their days as not as Derek and Clive but in their earlier guise of Pete and Dud. What strikes me most about them was the lack of alignment of ethical values in a particular sketch.
If we accept that ethics is important, then its “cultivation” must be the responsibility of all – not just those who are registered to give advice. I have never understood how the CEOs of some networks and major intermediaries are, for all intents and purposes, unqualified.
The recent paper refers to this but suggests that their controls over new appointments make this a non-issue but what of those already there? I remember having a conversation with a managing director of an IFA, who declared all of his advisers had to be chartered before 2013.
He was not even qualified to FPC level and had no appreciation of the amount of time needed, especially when working full-time, to achieve this level of tested competence. His lack of understanding, I would argue, would present similar prob-lems in the deployment of an ethical policy in his firm.
I also have an issue with ethics exams as I believe it to be a cultural issue instead of one for examination-type recall. Our fellow advisers in the UK are facing the move to being potentially cast as fiduciaries.
Believe it or not, up until this discussion kicked off (post-Madoff), many advisers had no responsibility to their client and could provide recommendations no matter the level of conflict of interest that was in place. Now fiduciary could broadly be defined as a relationship “relating to or based on a trust” and is that not the role we all aspire to with clients in being seen as their trusted adviser.
To do this in a transactional relationship is not easy. In fact, when we consider that “restricted advisers” will still need to show suitability instead of a plea of “but that’s all we have in the way of options”, the post-RDR world reinforces the need to be client-centric at all times.
To appreciate or better still to determine if an adviser is client-centric takes knowledge of what they do and how well they do it. If you fully digested the recent paper from the FSA, it clearly indicated that this places the supervisor in a position central to the development of advisers and leaves the chief executives somewhat isolated. The concept of them being monitors is firmly rejected. They desire the role of coach because it’s not enough for advisers to stand still.
Proactivity in development is essential if the adviser is to build his knowledge and improve his application of same. This requires skills that up to now have been rare in our community, to give this the impetus it needs requires the engagement of the CEOs, yet they are left to one side in the recent FSA paper on ethics and competence.
It is this lack of engagement at chief executive level that leads to a lack of urgency at adviser level. I recall that some years ago an Imro compliance visit to my old firm suggested to my then CEO that I and not he should be setting strategy in my area of expertise. This disenfranchisement of the CEO is not helpful and unless you prefer the communist approach or decision by committees can lead to inertia.
If they remain untested, those in power will take decisions on the basis of expediency instead of taking the client-centric approach, as recent events have confirmed.
The recent article in MM about those seeking to (and succeeding in their aim to) circumvent the Law Society rules on solicitors referring to IFAs only simply underlines that this institutional disregard for ethical behaviour is endemic.
People are seeking to navigate around rules and regulations designed to eliminate bias instead of complying with them. The legal firms taking part need to be brought to book, where they refer to protection or trust advice to avoid detection, and quickly. If any reader knows who they are, now is the time to blow the whistle. If you don’t know how to do this effectively, email me at MM (firstname.lastname@example.org ). I will then ensure that this list finds its way to the Law Society to aid their investigation.
For everyone to get the “ethics message”, everyone must be tested, be that CPD or otherwise. But to successfully pass the ethics benchmark, surely those supervising or setting strategy need to be at level four or above? If they remain untested, their deep immersion in the culture that supports ethics in the advice place will never really occur.
But back to Pete and Dud. They once had a hit single entitled, The Piano Teacher”, where Pete had the unrealistic aim of playing like a concert pianist after a couple of lessons. This offends Dud’s integrity and his outburst of indignation results in Pete stating “integrity is a valuable thing and I am willing to pay for it”, calming his tutor’s outrage with his wallet. Ironically, the very thing that clients will seek from us in reality are ethics, integrity. If people have been adequately tested to deliver this, then many will pay for their hire.
Robert Reid is managing director of Syndaxi Chartered Financial Planners