It is no surprise that this year is turning out in much the manner that last year ended, with a lot of unfinished business, both on the geopolitical 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 most hostile climate we have experienced in many a year. If history is to repeat itself, events in the Gulf may be 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, of course, is on advice, which is where IFAs' strengths should lie and what clients rely on us for.
As far as regulation is concerned, it promises to be a particularly busy year, with the FSA having put everyone on notice of numerous areas that are to be reviewed. There will be some fundamental changes to working relationships that will affect us all.
While everyone hopes that history will repeat itself in respect of investment returns, the concern I have is that it may also repeat itself adversely when it comes to protecting the investing consumer, who, of course, remains the most important part of our businesses.
It is no good trying to reopen 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.
At the time of writing, the much delayed results of CP166 are awaited. However, there are two key documents dovetailing with its release that are out for consultation, namely, DP19 dealing with simplified products and CP157 on the examination framework for our sector. We are hopeful for a positive outcome but there is the danger of the complete opposite being the end result.
It is for this reason that, notwithstanding the time constraints, we should not allow complacency to end up shaping the framework of investor relations. There is an onus on us all to be involved in the process, making our opinions known so that we can have some input on the outcome, so ensuring that investors are not disadvantaged.
It does seem 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 two papers I refer to.
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 possess a good knowledge of the market and product availability to impart this advice in the first place.
The creation of simplified investment products does not automatically mean that they are suitable and some knowledge will be required before they are selected, either through an individual's own research or, more likely, with some form of advice.
This then brings me to the examination framework. The introduction of examinations has produced a more professional environment over the last 10 or 12 years and there is the opportunity to augment the progress that has been made, creating higher professional standards. It is disappointing in the short term that the consultation document made no specific reference to existing examinations and in the short term it rather puts on hold the study for additional qualifications until such time as 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, therefore, that after Sandler criticised the investment community for not having sufficient understanding about investment products, there are proposals for lower standards of training, when we know by experience that this is an accident waiting to happen.
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. Consider the highest peak number of Lautro-registered individuals when compared with the total numbers of registered individuals now, which rather proves my point.
We must not let history repeat itself and create a free-for-all. Instead, let us ensure that our views are made known at every opportunity so that at least we have a chance of influencing the end result. Complacency will certainly not achieve that.
Nick Conyers is a director of Pearson Jones