It is no surprise that this year has started out much in the manner that 2002 ended, with much unfinished business, both on the geo-political front and in a number of areas related to regulation.
For most IFAs, the immediate focus is to eke out investment returns for clients in the hostile climate. If history is to repeat itself, then once final decisions have been made in respect of any action in the Gulf, we may see a platform from which modest investment returns might be expected but there is the need to plan for a backstop in a worst-case scenario. The emphasis is on advice.
Looking at history also brings me to the area of regulation, with the FSA having put everyone on notice of numerous areas to be reviewed. There are going to be some fundamental changes to working relationships that are going to affect us all.
While everyone hopes the historic case will apply in respect of investment returns, the concern I have is it may also repeat itself adversely when it comes to protecting the investing consumer.
It is no good trying to re-open the argument on the subject of polarisation as the changes are going to take place, for better or for worse, even though it is often wise to reflect that “if it ain't broke, don't try to fix it” mentality is sometimes right.
At the time of writing, the much delayed results of CP121 are awaited. However, there are two key documents dovetailing with its release that are out for comment and consultation, namely, DP19 dealing with simplified products and CP157 for the examination framework for our sector.
Both of these fall into the half-empty glass scenario where we are hopeful for a positive outcome but where there is the danger of the complete opposite being the end result. We should not allow complacency to end up shaping the framework of investor relations. There is an onus upon us all to be involved in the process, making our opinions known so we can have some input on the outcome.
It does seem sometimes that the end results of regulatory decisions are somewhat schizophrenic at times and there is a mismatch between cause and effect. I see this as a danger in respect of the two papers to which I have referred.
There is no doubt that there needs to be a mechanism to encourage saving among those just starting out in their careers and the less well-off, using a simplified format.
Many of us will recall the days when a simple unit trust savings plan could be established efficiently, with the minimum of fuss and with the knowledge that this was good advice in a less litigious environment. Nevertheless, one had to have a good knowledge of the market and product availability to impart this advice.
The creation of simplified investment products does not automatically mean they are suitable and some knowledge will be required before they are selected, either through an individual's research or, more likely, with some form of advice.
This brings me to the exam framework. The introduction of exams has produced a more professional environment. There is the opportunity to create higher professional standards. It is disappointing in the short term that the consultation document made no specific reference to existing exams. In the short term, it rather puts on hold the study for additional qualifications until a table of recognised examinations is published. Notwithstanding that, the obvious move for regular assessment should again help provide comfort for the investing public in the longer term.
It does seem strange that when Sandler criticised the investment community for not having sufficient understanding about investment products, there are proposals for lower standards of training where we know that this is an accident waiting to happen.
In more recent times, we have all come across examples of the incorrect sales of Isas via the supermarket checkout, resulting in the recent amnesty for this type of contract. It should not be forgotten that the breakdown of polarisation came about because of the huge numbers of “salespeople” who just promoted products on the strength of what they had been told by their management.
Let us not allow history repeat itself and create a free-for-all but ensure our views are made known at every opportunity so we have a chance of influencing the end result. Complacency will certainly not achieve that.
Nick Conyers is a director at Pearson Jones